**Estimating Supply and Demand Functions for Good X**To estimate the supply and demand functions for good X, we consider the following variables: $ P_x $, the price of good X, and $ P_y $, the price of an alternative good Y. The collected market data are as follows:- $ P_x = 6.4 $- $ P_y = 50 $- $ Q_x = 23 $The elasticities provided are:- Own-price elasticity of supply: 0.2- Cross-price elasticity of supply: 0.1- Own-price elasticity of demand: -0.5- Cross-price elasticity of demand: 1.5**Assumptions:**We assume that supply and demand are linear functions with respect to the two goods. Using the provided information, we aim to "recover" these two functions by estimating six parameters. This involves verifying that your estimated functions align with the data on market prices and quantity.

Given Px=6.4, Py=50 and Qx=23 The own price elasticity of supply is 0.2, cross price elasticity of…

We want to "estimate" the supply and demand functions for good X. These functions depend on Px, the price of good X and, Py, the price of an alternative good Y. The collected market data are: Px= 6.4, Py = 50, Qx = 23, Its own-price elasticity of supply is 0.2, cross-price elasticity of supply is 0.1. Its own-price elasticity of demand is -0.5, cross-price elasticity of demand is 1.5. Assuming that the supply and demand are linear functions with respect to the two goods, use the aforementioned information to "recover" the two functions. (You are asked to "estimate" 6 parameters.) Verify that your "estimated" functions are consistent with the data on market prices and quantity.

We want to "estimate" the supply and demand functions for good X. These functions depend on Px, the price of good X and, Py, the price of an alternative good Y. The collected market data are: Px= 6.4, Py = 50, Qx = 23, Its own-price elasticity of supply is 0.2, cross-price elasticity of supply is 0.1. Its own-price elasticity of demand is -0.5, cross-price elasticity of demand is 1.5. Assuming that the supply and demand are linear functions with respect to the two goods, use the aforementioned information to "recover" the two functions. (You are asked to "estimate" 6 parameters.) Verify that your "estimated" functions are consistent with the data on market prices and quantity.

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

**Estimating Supply and Demand Functions for Good X**

To estimate the supply and demand functions for good X, we consider the following variables: $ P_x $, the price of good X, and $ P_y $, the price of an alternative good Y. The collected market data are as follows:

- $ P_x = 6.4 $
- $ P_y = 50 $
- $ Q_x = 23 $

The elasticities provided are:

- Own-price elasticity of supply: 0.2
- Cross-price elasticity of supply: 0.1

- Own-price elasticity of demand: -0.5
- Cross-price elasticity of demand: 1.5

**Assumptions:**

We assume that supply and demand are linear functions with respect to the two goods. Using the provided information, we aim to "recover" these two functions by estimating six parameters. This involves verifying that your estimated functions align with the data on market prices and quantity.

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