QUESTION TWOA. Empirical estimates suggest the following price elasticity of demand: 0.6 for CocaCola; 4.0 for foreign vacation travel; and 0.2 for food. Úsing the determinants ofprice elasticity of demand, explain why each of these commodities would havethese coefficients elasticity.B. Lisa Gee Ghana Ltd., is the main sales agent of Infinix phones in Ghana. Theeconomist of this enterprise has estimated the demand function for the firm'sproducts per week to be of the form:Q = 445 - 2.5P - 81 + 2.5Prwhere; Q is the quantity demanded of Infinix phones, P. is its own-price, Pr is theprice of a related good (Tecno Phones) and I is income.Giventhat Pi = 10, Pr = 5 and I = 40, use the above information to:i. Determine the quantity demanded of Infinix phones per week and computethe own-price elasticity of demand for Infinix phones and interpret yourresults.ii. Based on your answer in (i), what pricing policy would you recommend forthe firm in order to maximize its total revenue?iii. Calculate the cross-price elasticity of demand between Infinix and Tecnophones, interpret your results and determine the kind of relationship thatexists between the two.iv. Compute the income elasticity of demand and determine if Infinix phones arenormal goods or not. Explain your results.

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KUESTION TWO A. Empirical estimates suggest the following price elasticity of demand: 0.6 for Coca Cola; 4.0 for foreign vacation travel; and 0.2 for food. Using the determinants of price elasticity of demand, explain why each of these commodities would have these coefficients elasticity.

KUESTION TWO A. Empirical estimates suggest the following price elasticity of demand: 0.6 for Coca Cola; 4.0 for foreign vacation travel; and 0.2 for food. Using the determinants of price elasticity of demand, explain why each of these commodities would have these coefficients elasticity.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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