1.4 Use the facts in Exercise 1.3: a. Hong and Wolak estimate that the elasticity of demand...
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1.4 Use the facts in Exercise 1.3:
a. Hong and Wolak estimate that the elasticity of demand for postal services is -1.6. Assume that there is a constant elasticity of demand function, Q = Xp-1.6, where X is a constant. In 2006, the price of a first-class stamp went from 37¢ to 39¢.
Given the information in the problem about the effect of the price increase on revenue, calculate X.
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