Question: The demand function of a good is given by Q = a bP cPA + dY where P is the price of the good, PA
The demand function of a good is given by Q a bP cPA dY where P is the price of the good, PA is the price of an alternative good, Y is income and the coecients a b c and d are all positive. It is known that P PA Y and Q a Is the alternative good substitutable or complementary? Give a reason for your answer. b Find expressions, in terms of b c and d for the i price elasticity of demand; ii crossprice elasticity of demand; iii income elasticity of demand. c The crossprice elasticity is The income elasticity is four times the magnitude of the price elasticity. When income increases by the demand increases by Determine the values of a b c and d
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