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#3: A few elasticities problems Use the demand function Qd = 400 – 20Px + 5Po...

#3: A few elasticities problems

Use the demand function Qd = 400 – 20Px + 5Po + 3Y + 16Z, where Y = income in thousands, Z = tastes, Po = price of other goods, and Px = own price.

What is the demand equation if the price of other goods is $2, the individual’s income in thousands is $45, and tastes are represented by 30?

What happens (what is the new demand equation) if the individual’s income increases to $50?

If the price of the good itself is $5, what is the income elasticity from $45,000 to $50,000 in income? (from part a to part b)

Go back and assume income is $45 thousand. If price is $30, what is the quantity? If price is $35, what is the quantity? What is the elasticity from a price of $30to a price of $35?

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