1. The demand for good X is given by Qdx 1,200-P+P,-8P, +M. Research shows that the prices of related goods are given by Py-PHP 5,900 and P-PHP $90, while the average income of individuals consuming this product is M=PHP 55,000. d. Calculate the Cross-price elasticity using Pz as the price of related goods. Are good Z substitutes? Or complements? (Interpret your result.) e. Calculate the Income Price elasticity. Is X an inferior good? Luxury? Or Necessity? (Interpret your result.) f. Suppose that the demand function is in log-linear form: InQdx = 7-InP+InP,-8lnP, + InM, and the that the prices of related goods are given by P,-PHP 5,900 and P-PHP $90, while the average income of individuals consuming this product is M-PHP 55,000. Also, the good X will be purchased when P, PHP 4,910. How much is the projected quantity demanded for good X? Interpret your result. 10

1. The demand for good X is given by Qdx 1,200-P+P,-8P, +M. Research shows that the prices of related goods are given by Py-PHP 5,900 and P-PHP $90, while the average income of individuals consuming this product is M=PHP 55,000. d. Calculate the Cross-price elasticity using Pz as the price of related goods. Are good Z substitutes? Or complements? (Interpret your result.) e. Calculate the Income Price elasticity. Is X an inferior good? Luxury? Or Necessity? (Interpret your result.) f. Suppose that the demand function is in log-linear form: InQdx = 7-InP+InP,-8lnP, + InM, and the that the prices of related goods are given by P,-PHP 5,900 and P-PHP $90, while the average income of individuals consuming this product is M-PHP 55,000. Also, the good X will be purchased when P, PHP 4,910. How much is the projected quantity demanded for good X? Interpret your result. 10

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Suppose a 10% increase I price of a different product (such y), has resulted in a 30% decrease in the demand for OUR product (say, product X). What can you tell about cross elasticity of demand? (Calculate and demonstrate your answer). Are x and y substitutes or complement? Why?
2) Ernesto is looking to purchase a new vehicle as his income has increased from $2,000 per month to $3,000 per month, so his purchase increases from 0 to 1 vehicle. He see's a new Mercedes Benz that decreased its price from $45,000 to $42,000. What is Ernesto's income elasticity of demand for a Mercedes Benz vehicle?
Suppose the own price elasticity of demand for good X is -2, its income elasticity is -1, its advertising elasticity is 2, and the cross- price elasticity of demand between it and good Yis-3. Determine how much the consumption of this good will change it Instructions: Enter your responses as percentages. If you are entering a negative number, be sure to use a (-) sign. a. The price of good X decreases by 4 percent. percent b. The price of good Y increases by 10 percent. percent c. Advertising decreases by 3 percent. percent d. Income increases by 2 percent. percent
1. Calculate the Price elasticity of demand, & for the following examples: a) Demand is given by Q = 50 – P at the price of $10. b) Demand is given by Q= 100 - P, at the price of $50. %3D c) Demand is given by Q= 25 - .25P, at the price of $40. d) Demand is given by Q = 20 - .1P, at the price of $80. e) Demand is given by Q = 60 – 1/3P, at the price of $60.
11 BIUA + Arlal I| II1 I I 2 The following questions are about income elasticity of demand. 9) Mr. Leon's income increased by 10%. (His "mommy" gave him a raise in his allowance because he was a "good little boy.") His consumption of Lego's then increased by 25%. Calculate his income elasticity. Does this imply that Lego's are a regular or an inferior product for Mr. Leon? 10) Mr. Mendivil's income increased by 20%. His consumption of pictures of Mr. Leon then decreased by 100%. Calculate the income elasticity of demand for the product. Does this imply that pictures of Mr. Leon are regular or inferior products? 11) Larry the Wild & Crazy Monkey saw a decrease in his income by 25%. With this, his consumption of berries increased by 50%. Calculate his income elasticity of demand. What can we conclude about berries as a consumer good for Larry the Wild & Crazy Monkey? Explain. ip lili 司