Suppose demand for good A is given by QDA= 500- 5PA+ 2PB+ 0.80I where PA is the price of good A, PB is the price of some other good B, and I is income. Assume that PA is currently Tk.10 PB is currently Tk.5, and I is currently Tk.200. 1. What is the elasticity of demand for good A with respect to the price of good A at the current situation? Hint: Find ∂QDA/∂PA and use in place of (∆QDA/∆PA). Comment on the value of the price elasticity. 2. What is the cross-price elasticity of the demand for good A with respect to the price of good B at the current situation? Hint: Find ∂QDA/∂PB and use in place of (∆QDA/∆PB). Comment on the value of the cross-price elasticity. 3. What is the income elasticity of demand for good A at the current situation? Hint: Find ∂Q/∂I and use in place of (∆Q/∆I). Comment on the value of the income elasticity
Suppose demand for good A is given by QDA= 500- 5PA+ 2PB+ 0.80I where PA is the price of good A, PB is the price of some other good B, and I is income. Assume that PA is currently Tk.10 PB is currently Tk.5, and I is currently Tk.200.
1. What is the
2. What is the cross-
3. What is the income elasticity of demand for good A at the current situation? Hint: Find ∂Q/∂I and use in place of (∆Q/∆I). Comment on the value of the income elasticity.
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