Illustrate is the point cross elasticity among steel

Reference no: EM1328836

Point Income Elasticity/Point Cross Elasticity

1. The McNight company is a major producer of steel. Management estimates that the demand for the company's steel is given by the equation:
Qs=5,000-1000Ps + 0.1I + 100 Pa
Where Qs is steel demand in thousands of tons per year, Ps is the price of steel in dollars per pound, I is income per capita, and Pa is the price of aluminum in dollars per pound. Initially, the price of steel is $1 per pound, income per capita is $20,000 and the price of aluminum is $0.80 per pound.

a. How much steel will be demanded at he initial prices and income?

b. What is the point income elasticity at the initial values?

c. What is the point cross elasticity between steel and aluminum? Are steel and aluminum substitutes or complements?

d. If the objective is to maintain the quantity of steel demanded as computed in part (A), what reduction in steel price will be necessary to compensate for a $0.20 reduction in the price of aluminum?

Reference no: EM1328836

Questions Cloud

Team type in mastering virtual teams text : Identify one team type from the list in the Mastering Virtual Teams text to discuss.

Describe about current collaborative relationships : Which of the guideline elements does your organization already perform well and Which elements could your organization easily integrate into their current collaborative relationships? How?

Build a word document listing the software : The scenario is that you do volunteer work for the small, self-funded community support group. With very little money available, the group has been unable to computerize its operations.

Elucidate what is the cross elasticity of demand : Elucidate what is the cross elasticity of demand for pipes and pipe tobacco.

Illustrate is the point cross elasticity among steel : Illustrate is the point cross elasticity among steel and aluminum. Are steel and aluminum substitutes or complements

Difference between microsoft office and microsoft windows : Which applications are you likely to make use in the course of taking classes online.

The management team of nordstrom''s department store : Assume that you are part of the management team of Nordstrom's department store. The retail industry and Nordstrom's is under a great deal of pressure due to the state of the economy.

Explian solution to supply chain : The solution to Supply Chain - supply contract aid both parties in terms of their roles/responsibilities involving the supply chain

Explain web based ebusiness solution : Explain Web Based eBusiness solution and How would an organization prepare for the transition from doing its business process by hand

User Account

All Pages