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4 May 2019
Suppose demand for good A is given by Qa=500-10Pa+2Pb+0.7Y where PA is the price of good A, Pb is the price of some other good b and Y is income. Assume that Pa is currently $10, Pb is currently $5 and Y is currently $100.
i) What is the elasticity of demand for good A at the current situation?
ii) What is the cross-price elasticity of demand for good A with respect to good B at the current situation?
iii) Based on what you found in ii, what can you conclude about the relationship between good A and good B?
Suppose demand for good A is given by Qa=500-10Pa+2Pb+0.7Y where PA is the price of good A, Pb is the price of some other good b and Y is income. Assume that Pa is currently $10, Pb is currently $5 and Y is currently $100.
i) What is the elasticity of demand for good A at the current situation?
ii) What is the cross-price elasticity of demand for good A with respect to good B at the current situation?
iii) Based on what you found in ii, what can you conclude about the relationship between good A and good B?
Deanna HettingerLv2
4 May 2019
