Elasticity of demand for the product

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Q1. The demand for tulips in Delft, Holland, is estimated by the following linear regression as:
QD=125-15P+5Y
where Y is income in thousands of euros, Q is the quantity of tulips in units, and P is price in euros. What is the point price elasticity of tulips at P=3 euros and Y= 20 euros.

Q2. Why would we expect that the price elasticity of demand for the product of an individual firm would typically be greater than the price elasticity of demand for the product overall? Illustrate your answer with example.

Reference no: EM136782

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