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Suppose the demand function for a firm's product is given by lnQXd= 7 - 1.5 lnPX+ 2 lnPY- 0.5 lnM+ lnAwhere:
Px= $15
Py= $6
M= $40,000, and
A= $350
a. Determine the own price elasticity of demand, and state whether demand is elastic, inelastic, or unitary elastic.
Own price elasticity:
Demand is:
(Click to select)elasticunitary elasticinelastic
b. Determine the cross-price elasticity of demand between goodXand goodY, and state whether these two goods are substitutes or complements.
Cross-price elasticity:
These two goods are:
(Click to select)complementssubstitutes
c. Determine the income elasticity of demand, and state whether goodXis a normal or inferior good.
Income elasticity:
Good X is:
(Click to select)inferiornormal
d. Determine the own advertising elasticity of demand.
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