Question
The demand equation for a firm's product has been estimated as Ln Qx = 7.3 - 2 Ln Px + 0.5 Ln I + 0.25
The demand equation for a firm's product has been estimated as
Ln Qx = 7.3 - 2 Ln Px + 0.5 Ln I + 0.25 Ln Py - 1.5 Ln Pz,
where Qx represents unit sales of brand X, Px is the price of brand X, I is per-capita income, Py is the price of brand Y, and Pz is the price of brand Z.
(A) Write demand equation in its multiplicative form.
(B) What is the price elasticity of demand for brand X? is demand price elastic or inelastic?
(C) What is the income elasticity of demand for brand X? What type of good is brand X?
(D) What is the cross-price elasticity of demand for brand X in relation to the price of brand Y? What is the relationship between brand X and brand Y?
(E) What is the cross-price elasticity of demand for brand X in relation to the price of brand Z? What is the relationship between brand X and brand Z?
(F) What effect will an increase in Px by 10% have on the firm's total revenues?
(G) What is the total effect will an increase in Px by 10%, a decrease in I by 3%, an increase in Py by 5%, and a decrease in Pz by 3% on the demand for the firm's product?
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