The research department of the Corn Flakes Corporation (CFC) estimated the demand of the corn flakes it sells: Qx =1.0 -2.0Px +1.5I +0.8Py -3.0Pm +1.0A Where Qx =Sales of CFC cornflakes, in millions of 10-ounce boxes per year; Px= the price of CFC cornflakes, in dollars per 10-ounce box; I= personal disposable income in millions of dollars per year; Py= price of competitive brand of cornflakes, in dollars per 10-ounce box; Pm= price of milk in dollars per quart; and A= advertising expenditures in thousands of dollars per year. Given: Px = $2, I=$4, Py= $2.50, Pm= $1, and A= $2 What is the cross-price elasticity of demand for good X as the result of a given percentage change in the price of a competitive brand Y? Is the demand for good X cross-price elastic, or inelastic? Are good X and Y substitutes, or complementary goods? How you know?
The research department of the Corn Flakes Corporation (CFC) estimated the
Qx =1.0 -2.0Px +1.5I +0.8Py -3.0Pm +1.0A
Where Qx =Sales of CFC cornflakes, in millions of 10-ounce boxes per year; Px= the
Given: Px = $2, I=$4, Py= $2.50, Pm= $1, and A= $2
What is the cross-
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