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1.(10 points) Find the point price elasticity, the point income elasticity, and the point cross-price elasticity at P1=10, I=20, and P2=9, if the demand function

1.(10 points) Find the point price elasticity, the point income elasticity, and the point cross-price elasticity at P1=10, I=20, and P2=9, if the demand function of product 1 were estimated to be:

Q1 = 108 - 8P1 + 2I + 2P2.

(1)Is the demand for product 1 elastic or inelastic?

(2)Is product 1 a luxury or a necessity?

(3)Does product 1 have a close substitute or complement? Find the point elasticity of demand.

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