Calculate the elasticity of demand for good x

Reference no: EM13151939

The demand for good X is given by the following equation:

Q_X = 10 P_X^-2.4 P_Y I^1.2A_X ^0.001A_Y^-0.003

where P_X and P_Y, and P_Z are the prices of X and Y, I is per capita income, A_X is advertising on good X, and A_Y is advertising on good Y.

(a) Should the price of X be increased or decreased if the firm is interested in maximizing revenue?

(b) Are goods X and Y gross substitutes or complements?

(c) By how much must the price of X change if per capita income decreases by 4% and the goal is to keep Q_X constant?

(d) Calculate the elasticity of demand for good X with respect to advertising on good X. Interpret your answer. Can you tell whether the firm is spending too much or too little on advertising?

(e) If the manufacturer of good Y stops advertising completely, what would be the impact on demand for good X according to this demand equation?

Reference no: EM13151939

Questions Cloud

How many ml of 2.00m h2so4 are required : How many ml of 2.00M H2SO4 are required to neutralize 50.0mL of 1.00M KOH?

What is the name of distribution of number of customers : A) What is the name of the distribution of the number of satisfied customers from this sample? B) What is the expected value? C) What is the standard deviation?

Why do marginal costs first fall and then begin to rise : Why do marginal costs first fall and then begin to rise? Why are marginal costs important to a firm when making decisions to increase or decrease production?

History of the game : Assume that the history of the game is common knowledge. That is, in period t, the past choices of effort for all doctors over periods 1, ..., t - 1 are observed

Calculate the elasticity of demand for good x : Calculate the elasticity of demand for good X with respect to advertising on good X. Interpret your answer. Can you tell whether the firm is spending too much or too little on advertising?

Externalities public goods lack of information in the market : Externalities Public Goods Lack of Information in the market Too much competition all the above are reasons for market failure

Determining the starting date of credit period : Merchandise is ordered on June 13; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on June 16; the merchandise is received by the buyer on June 18; the entry is made in the buyer's accounts on ..

Least effect on sample size : Which of the following has the least effect on sample size:

Find probability of observing three defects in wire : The number of defects per foot Y is assumed to have a Poisson distribution with mean = 2. i) What is the probability of observing 3 defects in 4 feet of wire?

User Account

All Pages