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Home / Questions / The demand for a good X is estimated to be Q x 22,000 25P x 4P y 1M 1 5A where A x r...

The demand for a good X is estimated to be Q x 22,000 25P x 4P y 1M 1 5A where A x represents the amount of advertising spent on X and

The demand for a good (X) is estimated to be Q x = 22,000 - 2.5P x + 4P y - 1M + 1.5A x , where A x represents the amount of advertising spent on X and the other variables have their usual interpretations. Suppose the price of good X is $550, good Y sells for $40, the company utilizes 3,000 units of advertising, and consumer income is $20,000.

a. Calculate the own price elasticity of demand at these values of prices, income, and advertising. Is demand elastic, inelastic, or unitary elastic?

b. Calculate the cross price elasticity of demand at these values of prices, income, and advertising. Is demand elastic, inelastic, or unitary elastic?

c. Calculate the income elasticity of demand at these values of prices, income, and advertising. Is demand elastic, inelastic, or unitary elastic?

Feb 07 2020 View more View Less

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