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Suppose the demand for good X is given by Qxd = 500 – 10Px + 2Py + 0.7I, where Px is the price of good X. Py is the price of some other good Y, and I is income. Assume that Px is currently $10, Py is currently $5, and I is currently $100. What is the elasticity of demand for good X with respect to its price at the current situation? Interpret your result. What is the cross-price elasticity of the demand for good X with respect to the price of good Y at the current situation? What can you tell about X and Y. What is the income elasticity of demand for good X at the current situation? Comment on the type of good X.
Suppose the demand for good X is given by Qxd = 500 – 10Px + 2Py + 0.7I, where Px is the price of good X. Py is the price of some other good Y, and I is income. Assume that Px is currently $10, Py is currently $5, and I is currently $100. What is the elasticity of demand for good X with respect to its price at the current situation? Interpret your result. What is the cross-price elasticity of the demand for good X with respect to the price of good Y at the current situation? What can you tell about X and Y. What is the income elasticity of demand for good X at the current situation? Comment on the type of good X.
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2 Jun 2021