Imagine that the demand for the product X is given by the following demand function: Qx = 1000 – 500P× + 200PY + 0,00251² + 0,051 Where the price of product X (Px) equals 10 kr., the price of product Y (PY) equals 5 kr., and the consumers average income (I) equals 10.000 kr. Question A: Calculate the price elasticity of demand for product X and explain what it expresses. Question B: Calculate the cross-price elasticity between product X and Y and explain what it shows about the relationship between the two products. Question C: Calculate the income elasticity of demand and explain what it expresses. 315886
Imagine that the demand for the product X is given by the following demand function: Qx = 1000 – 500P× + 200PY + 0,00251² + 0,051 Where the price of product X (Px) equals 10 kr., the price of product Y (PY) equals 5 kr., and the consumers average income (I) equals 10.000 kr. Question A: Calculate the price elasticity of demand for product X and explain what it expresses. Question B: Calculate the cross-price elasticity between product X and Y and explain what it shows about the relationship between the two products. Question C: Calculate the income elasticity of demand and explain what it expresses. 315886
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
100%
1. Calculate the
2. Calculate the cross-price elasticity between product X and Y and explain what is shows abotu the relationship between the two products
3. Calculate the income elasticity of demand
Transcribed Image Text:Imagine that the demand for the product X is given by the following demand function:
Qx
= 1000 – 500P× + 200PY + 0,00251² + 0,051
Where the price of product X (Px) equals 10 kr., the price of product Y (PY) equals 5 kr., and
the consumers average income (I) equals 10.000 kr.
Question A:
Calculate the price elasticity of demand for product X and explain what it expresses.
Question B:
Calculate the cross-price elasticity between product X and Y and explain what it shows about
the relationship between the two products.
Question C:
Calculate the income elasticity of demand and explain what it expresses.
315886
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