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Home / Questions / 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

# 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

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?

Apr 03 2020 View more View Less Subscribe To Get Solution