10. The demand function good X is ln Qdx a b ln Pxc ln Me,...
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10. The demand function good X is ln Qdx
a b ln Pxc ln Me, where Px is the price of good X and M is income. Least squares regression reveals that รข
5.25, and
a. If M 45,000 and Px 5.69, compute the own price elasticity of demand based on these estimates. Determine whether demand is elastic or inelastic.
b. If M 45,000 and Px 5.69, compute the income elasticity of demand based on these estimates. Determine whether X is a normal or inferior good.
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