Question: The demand equation for a good is given by the equation: Q = 700 2P + 0.02Y (Where P is the price and Y is

  1. The demand equation for a good is given by the equation:

Q = 700 2P + 0.02Y

(Where P is the price and Y is the income).

Determine the following:

  1. Price elasticity of demand when P = $25 and Y = $500.
  2. Income elasticity of demand when P = $25 and Y = $500.
  3. Interpret the results obtained in (a) & (b) above.

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