Question
Suppose that you have estimated the following demand curve: Q D = 1200 4 P + .01 I You know that the current market price
Suppose that you have estimated the following demand curve:
QD = 1200 4P + .01I
You know that the current market price is $11 and average income (I) is $40,000.
a)Calculate the markets total Demand?
b)Calculate the market's consumer surplus.
c)Calculate the price elasticity of demand.
d)Is the price elasticity of demand calculated in Question #1c elastic or inelastic?
e)Calculate the income elasticity of demand
f)Based on the income elasticity of demand calculated in Question #1e, is this product a normal good or an inferior good?
Please show work for explanation
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started