Suppose the generic demand function of a hypothetical good is given by:

 Qd = 250 + 0.75Y- 0.35P + 0.25Py + 500, where Y is income, Py is price of the related good and P is price of the good .Y =1500. P=3, Py =2 then

 A. Find quantity of demand

 B. Calculate price elasticity of demand and interpret your result

 C. Calculate income elasticity of demand and identify the types of goods.

 D. Calculate cross price elasticity of demand and identify the nature of the good

Suppose that market price of gas increases from $2 to $3 per gallon and quantity demanded for this good falls from 24 to 18 gallons per week. Calculate price elasticity of demand and interpret the result.

Suppose that weekly income of a household decreases from $1,200 to $1,000 and quantity demanded for gas falls from 18 to 14 gallons per week. Calculate income elasticity of demand and interpret the result.

Suppose that market price of diesel fuel falls from $5 to $3 per gallon and afterwards weekly quantity demanded for gas decreases from 18 to 16 gallons per week. Calculate cross-price elasticity of demand for gas and interpret the result.

Suppose that market price of gas increases from $4 to $5 per gallon and quantity supplied for this good increases from 13 to 17 gallons per single car weekly. Calculate price elasticity of supply and interpret the result.

1.Explain the term Price Elasticity of Demand. When a firm raises the price of a commodity from $10 to $20, the quantity demanded falls from 10 units to 2. Calculate the price elasticity of demand using the average price method.

2. What is the Cross Price Elasticity of Demand? Explain how it helps identify complements and substitutes?

1. Would you expect the price elasticity of demand for cars to be more price elastic or more price inelastic than the price elasticity of demand for 2015 model year Subaru Outbacks?

2. Calculate the price elasticity of demand between two points on a given hypothetical demand curve. Point 1 will have a price that is $9.20 and a quantity of 156. Point 2 will have a price that is $9.40 and a quantity of 145.