1.What if the estimated demand function for a product X is:

Q_d = 150 - 3.25 P_x + 1.75 P_y - 0.85 M + A, where:

Q_d is quantity demanded of product X,

P_x is price of product X ($/unit),

P_y is price of another product Y ($/unit),

M is the average income of consumers of product X (in thousands of dollars), and

A is advertisement cost for product X (in thousands of dollars).

(a)What are the steps and calculation of the income elasticity of demand for product X when the price of X is $21, the price of Y is $10, the average income of consumers of X is $52,500, and the advertisement cost is $825. (show steps and calculation)

(b)Based on your estimated income elasticity of demand in (a), what kind of good is product X. Give an example of product X.

(c)What is the essence of estimating elasticities of demand in business and economics? Show and support two kinds of demand elasticities as examples or illustrations.

(d)As a manager of product X, other things equal, how would you decide to increase or decrease the price of X? Carefully explain.