Suppose the demand function for a firms product is given by ln Q d x = 7

Question:

Suppose the demand function for a firm’s product is given by

ln Q^d_x= 7 1.5 ln P_x + 2 ln P_y- 0.5 ln M + ln A

Where

P_x = $ 15,

P_y = $ 6,

M = $ 40,000, and

A = $ 350.

a. Determine the own price elasticity of demand, and state whether demand is elastic, inelastic, or unitary elastic.

b. Determine the cross- price elasticity of demand between good X and good Y, and state whether these two goods are substitutes or complements.

c. Determine the income elasticity of demand, and state whether good X is a normal or inferior good.

d. Determine the own advertising elasticity of demand.

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Managerial Economics and Business Strategy

ISBN: 978-0073523224

8th edition

Authors: Michael Baye, Jeff Prince

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Question Posted: Apr 18, 2014 08:59 AM

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Suppose the demand function for a firms product is given by ln Q d x = 7

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a The own price elasticity of demand is simply the c...View the full answer

Managerial Economics and Business Strategy

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