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A policy adviser suggests that in order to improve its balance of trade with China, Canada should lower the price of some heavy machinery equipment.
A policy adviser suggests that in order to improve its balance of trade with China, Canada should lower the price of some heavy machinery equipment. Suppose the demand function for this equipment is
whereQis quantity per year andpis price (measured in hundreds of thousands of dollars).
- Find an expression for the price elasticity of demand for this equipment. Suppose the currentpis equal to 3; at this price, is the demand elastic or inelastic?
- Continuing from a), explain (in words) whether you think Canada will succeed in raising its revenue if the policy adviser's suggestion is implemente
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