The general linear demand for good X is estimated to be

Q= 125,000 400P 0.76M+ 360PR

wherePis the price of goodX, Mis the average income of consumers who buy goodX,andPRis the price of related good R. The values ofP, M, andPRare expected to be $200, $45,000, and $120, respectively. Use these values at this point on demand to make the following computations.

a. Compute the quantity of goodXdemanded for the given values ofP, M,andPR.

b. For the quantity in part a,calculate the point price elasticity of demand. At this point on the demand, is demand elastic, inelastic, or unitary elastic? How would decreasing the price ofXaffect total revenue? Explain.

c. Calculate the income elasticity of demandEM. Is good X normal or inferior? Explain how a 3.5 percent decrease in income would affect demand forX, all other factors affecting the demand forXremaining the same.

d. Calculate the cross-price elasticityEXR. Are the goodsXandRsubstitutes or complements? Explain how a 6 percent increase in the price of related goodRwould affect demand forX, all other factors affecting the demand forXremaining the same?