Determine the own price elasticity of demand, and state whether demand is elastic, inelastic, or unitary elastic. Own price elasticity: -1.5 Demand is: 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. Cross-price elasticity: 2 These two goods are: Substitutes. c. Determine the income elasticity of demand, and state whether good Xis a normal or inferior good. Income elasticity: Good X is: d. Determine the own advertising elasticity of demand.
Suppose a research report has estimated the demand for a firm's product as ln QXd = 7 − 1.5 ln PX + 2 ln PY − 0.5 ln M + ln A where:
Px = $15
Py = $6
M = $40,000, and
A = $350
a. Determine the own
Own price elasticity: -1.5
Demand is: 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.
Cross-price elasticity: 2
These two goods are: Substitutes.
c. Determine the income elasticity of demand, and state whether good Xis a normal or inferior good.
Income elasticity:
Good X is:
d. Determine the own advertising elasticity of demand.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 5 images
