Question

Question 6 The demand for good x is given by x ∗ = 60 − 4Px + 2M + Py, where Px is the price of good x, Py is the price of good y, and M is income. Find the own-price elasticity of demand for good x when Px = 20, Py = 20, and M = 100. Is x an ordinary or giffen good? Explain.

Question 7 The demand for good x is given by x ∗ = 60−4Px + 2M +Py, where Px is the price of good x, Py is the price of good y, and M is income. Find the cross-price elasticity of demand for good x when Px = 20, Py = 20, and M = 100. Are x and y complements or substitutes? Explain.

Question 8 Imagine you work at Nike estimating the demand for shoes. Your boss tells you that due to new import tariffs, you need to increase the price of your product by 20%. She asks you to calculate what the percentage impact of this will be on sales. What should you calculate?

Answer #1

**Answer 6) Own price elasticity= -0.4**

**Since own price elasticity is negative,X is ordinary
good.**

**Answer 7) Cross price elasticity= 0.1**

**Since cross price elasticity is positive X and Y are
Substitutes**

1- The demand for
good X is estimated to be Qxd = 10,000 −
4PX + 5PY + 2M + AX where
PX is the price of X, PY is the price of good
Y, M is income, and AX is the amount of advertising on
X. Suppose the present price of good X is $50, PY =
$100, M = $25,000, and AX = 1,000 units. What is the
quantity demanded of good X?
Multiple Choice
61,500
61,300
61,300...

Suppose demand is given by Q xd = 50 −
4Px + 6Py + Ax,
where Px = $4, Py = $2, and Ax
= $50.
(a) What is the quantity demanded of good x? Please show your
calculations.
(b) What is the own price elasticity of demand (point elasticity)
when PX = $4? Is demand elastic
or inelastic at this price? Please explain.
(c) What is the cross price elasticity of demand between good X
and good Y when...

Suppose that the demand function for good x is given by
x = 10 - 2px + py + 0.5M, where
M=10 is income and px = 2 and py =
5.
(a) Calculate the own price elasticity of demand.
(b) Calculate the cross price elasticity of demand. Are the
goods substitutes or complements?
(c) Is the good normal or inferior? Calculate the income
elasticity of demand.
(d) Is the good a necessity or a luxury?

Suppose the demand curve for good X is of the form:
qx=1000 + I – 50px -20py. Suppose,
px=$10, py=$10, and income (I)=$100.
1)
Cross price elasticity of demand between X and Y = -1/2, and X
and Y are complements.
2)
Cross price elasticity of demand between X and Y = 1/2, and X
and Y are complements.
3)
Cross price elasticity of demand between X and Y = -1/2, and X
and Y are substitutes.
4)
Cross price...

The demand for good X is given by QXd = 6,000 - (1/2)PX - PY +
9PZ + (1/10)M Research shows that the prices of related goods are
given by Py = $6,500 and Pz = $100, while the average income of
individuals consuming this product is M = $70,000. a. Indicate
whether goods Y and Z are substitutes or complements for good
X.

The demand for your product X has been estimated to be QX
=7,880−4PX −2PY +PZ −0.1M
where Y and Z are other (related) products. The relevant price
and income data are as follows:PX =10,PY =15,PZ =50,M=40,000
a. Which goods are substitutes for X? Which are complements?
b. Is X an inferior or a normal good?
c. How much X will be purchased?
d. Graph the demand curve for X given the above information.
e. How will the demand curve change...

Suppose the demand function for ice cream (good X) is given by
Qx^d= 1200-5Px-0.08Pz+0.04M+3A where Px =$40, Px=$100, M=3000, A=
700, Z is a related good, M is income and A is the level of
advertising. •determine the own price elasticity, and whether the
demand is elastic, inelastic, or unitary elastic? What should
managers do to increase their profits? • determine the cross price
elasticity between good X and good Z and state whether they are
substitutes, or complements and...

Suppose demand is given Qxd = 50 - 4 Px + 6Py + Ax, where Px
=$4, Py =$2 and Ax = 50.
(a) What is the quantity demanded of good X? Please show your
calculations.
(b) what is the own price elasticity of demand (point
elasticity) when Px = $4? Is demand elastic or inelastic at this
price? Please explain.
(c) What is the cross price elasticity of demand between good X
and good Y when Px = $4...

Dan’s preferences are such that left shoes (good x) and right
shoes (good y) are perfect complements. Specifically, his
preferences are represented by the utility function U (x, y) =
minimum{x, y}.
(a) Draw several of Dan’s indifference curves. Which bundles are
at the “kink- points” of these curves?
(b) Assume that Dan’s budget for shoes is M = 10 and that the
price of a right shoe is py = 2. Find and draw Dan’s demand curve
for left...

7. Identify and explain, whether good X is a normal good or an
inferior good; an ordinary good or a Giffen good; a substitute or a
complement for good Y, if the demand for good X is described by the
demand function X (Px; Py; M) = (M – Px + 5Py). 8. Explain, what
exactly is meant by income elasticity of demand and show, how is it
calculated. 9. What does the income elasticity coefficient εM=0.5
imply? Provide exact...

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