Question
(a) The demand for good X has been estimated by Q x d = 12 3P x + 4P y . Suppose that good X
(a) The demand for good X has been estimated by Qxd = 12 3Px + 4Py. Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the own price elasticity. Please show your calculations
(b)The own price elasticity of demand for apples is 1.2. If the price of apples falls by 5 percent, by what percent will the quantity demanded of apples change and will this be an increase or a decrease? You must give an explanation and show all calculations.
(c).You are the manager of a popular shoe company. You know that the advertising elasticity of demand for your product is 0.15. By what percent will you have to increase advertising in order to increase demand by 10 percent? Please show your calculations.
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