1. The demand function for Product X is given by: Qdx=10+0.06I2Px0.5Py+0.7Pz where: a. (i) Calculate the own Price elasticity of demand (PED) for Good X. (ii) Discuss whether revenue can be increased by increasing the price of Good X. (iii) Illustrate on a well labelled demand graph for Product X, the Total Revenue earned when the Price of good X is equal to $9.00. This graph should be entitled 'Graph 1: Total Revenue of Product X.' (iv) Illustrate on another well labelled diagram, the area of Producer surplus and the area of Consumer surplus for Product X when the price of good X is $9.00. This graph should be entitled 'Graph 2: Producer and Consumer Surplus of Product X.' [20 marks] b. (i) Determine the Cross-Price elasticity of demand (XED) between Good X and Good Y. (ii) Using your answer for b. (i), explain the relationship between Good X and Good Y. (Substitute/ Complement). (iii) Determine the Cross-Price elasticity of demand (XED) between Good X and Good Z. (iv) Using your answer for b. (iii), explain the relationship between Good X and Good Z. (Substitute/Complement). [20 marks] Please submit with a covering sheet to show student I.D. # 1. The demand function for Product X is given by: Qdx=10+0.06I2Px0.5Py+0.7Pz where: a. (i) Calculate the own Price elasticity of demand (PED) for Good X. (ii) Discuss whether revenue can be increased by increasing the price of Good X. (iii) Illustrate on a well labelled demand graph for Product X, the Total Revenue earned when the Price of good X is equal to $9.00. This graph should be entitled 'Graph 1: Total Revenue of Product X.' (iv) Illustrate on another well labelled diagram, the area of Producer surplus and the area of Consumer surplus for Product X when the price of good X is $9.00. This graph should be entitled 'Graph 2: Producer and Consumer Surplus of Product X.' [20 marks] b. (i) Determine the Cross-Price elasticity of demand (XED) between Good X and Good Y. (ii) Using your answer for b. (i), explain the relationship between Good X and Good Y. (Substitute/ Complement). (iii) Determine the Cross-Price elasticity of demand (XED) between Good X and Good Z. (iv) Using your answer for b. (iii), explain the relationship between Good X and Good Z. (Substitute/Complement). [20 marks] Please submit with a covering sheet to show student I.D. #
