The demand functions for two commodities, A and B, are given by QA = AP 0.5 Y

Question:

The demand functions for two commodities, A and B, are given by 

QA = AP−0.5Y0.5 and QB = BP−1.5Y1.5 
where A and B are positive constants

(a) Find the price elasticity of demand for each good and hence comment on the relative sensitivity of demand due to changes in price.
(b) Find the income elasticity of demand for each good. Which good is normal and which is superior? Give a reason for your answer.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: