**Question:**Suppose the own price elasticity of demand for good X is -3, its income elasticity is 1, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4. Determine how much the consumption of this good will change if:a. The price of good X increases by 6 percent b. The price of good Y increases by 9 percent c. Advertising decreases by 5 percent d. Income falls by 4 percent**Answer:**To solve each part of the problem, use the given elasticities and the formula for change in quantity demanded given a change in a determinant:% Change in Quantity Demanded = Elasticity × % Change in Determinanta. **Price of good X increases by 6 percent:**- Own price elasticity of demand for X = -3 - % Change in price = 6% % Change in Quantity Demanded = -3 × 6% = -18%b. **Price of good Y increases by 9 percent:**- Cross-price elasticity of demand with good Y = -4 - % Change in price of good Y = 9% % Change in Quantity Demanded = -4 × 9% = -36%c. **Advertising decreases by 5 percent:**- Advertising elasticity = 2 - % Change in advertising = -5% % Change in Quantity Demanded = 2 × (-5%) = -10%d. **Income falls by 4 percent:**- Income elasticity = 1 - % Change in income = -4% % Change in Quantity Demanded = 1 × (-4%) = -4%These calculations provide insights into how different factors affect the consumption of good X.

Price elasticity of demand is a measure of the change in the quantity purchased of a product in…

good Y is -4. Determine how much the consumption of this good will change if: a. The price of good X increases by 6 percent b. The price of good Y increases by 9 percent c. Advertising decreases by 5 percent d. Income falls by 4 percent

good Y is -4. Determine how much the consumption of this good will change if: a. The price of good X increases by 6 percent b. The price of good Y increases by 9 percent c. Advertising decreases by 5 percent d. Income falls by 4 percent

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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