The daily demand for Guchi handbags is estimated in linear demand function as follows: Qd = 100 - 3P+ 4P * x y * -.01M + 2A Where, A represent the amount of advertising spent on Guchi handbags (x), P, is the price of Guchi, P Guchi sells at P2500 per unit, LV sells at P3500, the company utilizes 50 units of advertising, and is the price of Luis Vutton (LV), and M is average income. Suppose average consumer income is P20,000. Calculate and interpret: a. Price elasticity of demand for Guchi. If Guchi reduces its price 10% lower than before, what will be the total sale of Guchi? b. Cross-price elasticity of demand. Is the good y substitute or complement? If Guchi reduced half of its price what will be the sale for Guchi? c. Income elasticity of demand. Is Guchi normal or inferior good? What is the quantity sold if the price of Guchi is sold at the same price of LV?

The daily demand for Guchi handbags is estimated in linear demand function as follows: Qd = 100 - 3P+ 4P * x y * -.01M + 2A Where, A represent the amount of advertising spent on Guchi handbags (x), P, is the price of Guchi, P Guchi sells at P2500 per unit, LV sells at P3500, the company utilizes 50 units of advertising, and is the price of Luis Vutton (LV), and M is average income. Suppose average consumer income is P20,000. Calculate and interpret: a. Price elasticity of demand for Guchi. If Guchi reduces its price 10% lower than before, what will be the total sale of Guchi? b. Cross-price elasticity of demand. Is the good y substitute or complement? If Guchi reduced half of its price what will be the sale for Guchi? c. Income elasticity of demand. Is Guchi normal or inferior good? What is the quantity sold if the price of Guchi is sold at the same price of LV?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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