The extended demand function of good X is: QDX 1400 20 PX - 10 PY + 0.1 M where: QDX = quantity demanded of good X PX Price of good X PY = Price of related good Y (related in consumption to good X) M = Average consumer income. Fix the following variables: PX = 50 M = 10,000 Assume: PY changes from $50 to $80 What is the cross-price elasticity of the demand of good X with respect to PY [Use the arc elasticity formula.] a. -0.69 b. C. d. -0.87 Based on your answer to the previous question, goods X and Y are: a. b. C. 0.69 d. 0.87 inelastic complements inferior substitutes

The extended demand function of good X is: QDX 1400 20 PX - 10 PY + 0.1 M where: QDX = quantity demanded of good X PX Price of good X PY = Price of related good Y (related in consumption to good X) M = Average consumer income. Fix the following variables: PX = 50 M = 10,000 Assume: PY changes from $50 to $80 What is the cross-price elasticity of the demand of good X with respect to PY [Use the arc elasticity formula.] a. -0.69 b. C. d. -0.87 Based on your answer to the previous question, goods X and Y are: a. b. C. 0.69 d. 0.87 inelastic complements inferior substitutes

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The extended demand function of good X is:
QDX = 1400 20 PX - 10 PY + 0.1 M where:
QDX = quantity demanded of good X
PX Price of good X
PY = Price of related good Y (related in consumption to good X)
M = Average consumer income.
Fix the following variables:
PX = 50
M = 10,000
Assume:
PY changes from $50 to $80
What is the cross-price elasticity of the demand of good X with respect to PY [Use the arc elasticity formula.]
a. -0.69
b.
C.
d.
-0.87
Based on your answer to the previous question, goods X and Y are:
b.
0.69
a. inelastic
C.
0.87
d.
complements
inferior
substitutes

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