The daily demand for Invigorated PED shoes is estimated to be g = 100–3P, + 4P, –.01M +24, where A, represents the amount of advertising spent on shoes (X), P, is the price of good X, P, is the price of good Y, and M is average income. Suppose good X sells at Rs.50 a pair, good Y sells at Rs.70, the company utilizes 100 units of advertising, and average consumer income is Rs.40,000. Calculate and interpret 1. Own Price Elasticity of demand 2. Cross Price Elasticity of demand 3. Income Elasticity of demand. 4. Are goods X and Y substitutes or complements? 5. Is good Xa normal or an inferior good?
The daily demand for Invigorated PED shoes is estimated to be g = 100–3P, + 4P, –.01M +24, where A, represents the amount of advertising spent on shoes (X), P, is the price of good X, P, is the price of good Y, and M is average income. Suppose good X sells at Rs.50 a pair, good Y sells at Rs.70, the company utilizes 100 units of advertising, and average consumer income is Rs.40,000. Calculate and interpret 1. Own Price Elasticity of demand 2. Cross Price Elasticity of demand 3. Income Elasticity of demand. 4. Are goods X and Y substitutes or complements? 5. Is good Xa normal or an inferior good?
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter6: Simple Pricing
Section: Chapter Questions
Problem 5MC
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