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The demand curve for a product is given Qdx = 1500 − 5Px − 0.2Pz by...

The demand curve for a product is given Qdx = 1500 − 5Px − 0.2Pz by where

Pz = $300.

a. What is the own price elasticity of demand when Px = $200? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price below $200?

b. What is the own price elasticity of demand when Px = $125? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price above $125

c. What is the cross-price elasticity of demand between good X and good Z when Px = $125? What about when Px = $200? Are goods X and Z substitutes or complements?

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