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a} Show that elasticity of demand is -b in a log-linear demand function given by an=o- bflnP, where 9:0 is the quantity demanded, PH) is
a} Show that elasticity of demand is -b in a log-linear demand function given by an=o- bflnP, where 9:0 is the quantity demanded, PH) is the price, swell [Note that you can write log-linear demand functions in the following form too: Q = AP'h. The main goal of this question is not to test your calculus skills. Log-linear demand functions are widely used in practice [ and will he used in this course) and you should familiarize yourself with this type of demand fungjons.) b) The following estimates have been obtained for the market demand for cereal: an = 9.01 U.68]n P +0.75lna 1.3mm where Q is the quantity of cereal, P is the price of cereal, A is the level of advertising, and M is income. Based on this information, determine the effect on the consumption of cereal of a, A 5 percent reduction in the price of cereal In. A 4 percent increase in income e. A 20 percent reduction in cereal advertising e) la cereal a normal good, an inferior good or a luxury good according to the demand estimation given above
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