Exercise 2. The demand curve for a product is given Qd = 1500 − 5Px − 0.2Pz by where Pz = $300. What is the own-price elasticity of demand when Px = $200? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price below $200? What is the own-price elasticity of demand when Px = $125? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price above $125? What is the cross-price elasticity of demand between good X and good Z when Px =$125? What about when Px = $200? Are goods X and Z substitutes or complements?
Exercise 2. The demand curve for a product is given Qd = 1500 − 5Px − 0.2Pz by where Pz = $300. What is the own-price elasticity of demand when Px = $200? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price below $200? What is the own-price elasticity of demand when Px = $125? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price above $125? What is the cross-price elasticity of demand between good X and good Z when Px =$125? What about when Px = $200? Are goods X and Z substitutes or complements?
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter5: Price Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 2SQ
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Exercise 2. The demand curve for a product is given Qd = 1500 − 5Px − 0.2Pz by where Pz = $300.
- What is the own-
price elasticity of demand when Px = $200? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price below $200? - What is the own-price elasticity of demand when Px = $125? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price above $125?
- What is the cross-price elasticity of demand between good X and good Z when Px =$125? What about when Px = $200? Are goods X and Z substitutes or complements?
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