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Suppose demand for inkjet printers is estimated to be QD = 1000 - 5p + 10pX - 2pZ + 0.1Y. If p = 80, pX = 50, pZ = 150, and Y = 20,000; answer the following:

  1. What is the price elasticity of demand? 
  2. What is the cross-price elasticity concerning commodity X? Give an example of what commodity X might be. 
  3. What is the cross-price elasticity concerning commodity Z? Give an example of what commodity Z might be. 
  4. What is the income elasticity? 

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Nusrat Fatima
Nusrat FatimaLv10
28 Sep 2019
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Related questions

Now assume the following demand equation for product W:
Qdw= 1800- 40Pw +8.6Y -12Px +1.5Pz
If Pw= $18.50, Y= $1000, Px=140, and Pz= 30

A. Estimate the point of price elasticity of the demand for w at the given value for Pw, Y, Px, and Pz Is demand price elastic or price inelastic at this price of $18.50
B. Estimate the income elasticity of demand for W at the give values Pw, Y, Px, and Pz How would you classify product W?
C. Estimate the cross elasticity of demand between w and x at the values for Pw, Y, Px, and Pz. How would you classify products w and x?
D. Estimate the corss elasticity of demand between w and z at the values for Pw Y, Px, and Pz. How would you classify products w and z?

Assume that the aggregate demand equation for a good has been estimated to be Q = 50 – 2P + PZ + 4Y. Q is the quantity demanded, P is the price of the good in dollars per unit, PZ is the price of another good in dollars per unit, and Y is average consumer income in thousands of dollars (that is, when Y equals 10, the average consumer has $10,000 in income).

a. What is the price elasticity of demand when P equals 10, PZ is 20, and Y is 20?

b. What is the cross price elasticity due to a change in the price of good Z when PZ equals 20, P equals 10, and Y is 20?

c. What is the income elasticity of demand when P equals 10, PZ is 20, and Y is 20?

Starting with the data fro Problem 6 and the data on the price of a related commodity for the years 1986 to 2005 given below, we estimated the regression for the quantity demanded a commodity (which we now reliable (Q x), on the price of the commodity (which we now reliable (Qx), on the price of the commodity (which we now live Px), consumer income (which we now label Y), and price of the related commodity (Pz), and we obtained the following results.

Qx=121.86-9.50Px+ 0.04Y - 2.21P

(-5.12) (2.18) (-0.68)

R2=0.9633 F=167.33 D-W=2.38

The year 1986 1987 1988 1989 1990
Pz($) 14 15 15 16 17
The year 1991 1992 1993 1994 1995
Pz($) 18 17 18 19 20
The year 1996 1997 1998 1999 2000
Pz($) 20 19 21 21 22
The year 2001 2002 2003 2004 2005
Pz($) 23 23 24 25 25

(b) Evaluate the regression results. 1.P15(b) is to evaluate the above regression results in terms of the signs of the coefficients, the statistical significance of the coefficients, and the explanatory power of the regression (R2). The number in parentheses below the estimated slope coefficients refer to the estimated t values. The rule of thumb for testing the significance of the coefficients is if the absolute t value is greater than 2, the coefficient is significant, which means the coefficient is significantly different from 0. For example, the absolute t value for Px is 5.12, which is greater than 2; therefore, the coefficient of Px, (-9.50) is significant. In order words, Px does affect Qx. If the price of the commodity X increases by $1, the quantity demanded (Qx) will decrease by 9.50 units.

(c) What type of commodity is Z? Can you be sure? Are X and Z complements or substitutes?

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