2. The demand curve for a product is given by

where Pz $400.

a. What is the own price elasticity of demand when Px $154? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price below $154?

b. What is the own price elasticity of demand when Px $354? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price above $354?

c. What is the cross-price elasticity of demand between good X and good Z when Px $154? Are goods X and Z substitutes or complements?

Transcribed Image Text:

Q=1,000-2P+.02P