35 Question #1. Assume the following demand function for a good X: Qxd = 150 + 2Ax - 3Px +.01M + 4Py Where Qxd is the quantity demanded of X, Ax is advertising expenditure, Px Price of X, M is the average income, and Py is the price of another good Y. Suppose Px is 25 per unit, Py is per unit, the company utilizes 50 units of advertising, and average consumer income is 20,00 0. Calculate and interpret: A. The price elasticity of demand for X. If Px reduces by 10% lower than before, what will be the total sale of X? B. Cross price elasticity of demand. Is the good y substitute or complement? C. Income elasticity of demand. Is X normal or inferior goods. D. What is the quantity sold if the Good X is sold at the same price of Y? Hint: Note that elasticity can be expressed as: AQ Ed -= ax . Q P * = where ax is the coefficient of Price. Use the same for others