Question
This question focuses on the idea of cross price elasticity (often we use the example of peanut butter and jelly for complements) and the idea
This question focuses on the idea of cross price elasticity (often we use the example of peanut butter and jelly for complements) and the idea of complements and substitutes.We analyze data to see how the price of one product will affect the demand for another product.
If your company produced Pallets, and you are provided analysis such that the demand for Pallets is estimated to be
Qa = 1000 - 0.7pa + 12pX- 21pZ + 0.1Y
Note that pa = 80, pX = 50, pZ = 150, and Y = 20,000; answer the following:(18 Points)
You can either do this using calculus or an excel spreadsheetboth work.If you use calculus, show your work; if you use a spreadsheet, please submit the spreadsheet.
a.What is the price elasticity of demand for Pallets?This requires a calculation(5 Points)
b.What is the cross price elasticity with respect to commodity A and Z? In this example, the price of Good Z riseswhat happens to the quantity demanded for Good A (5 Points).Give an example of what commodity Z might be and what is the meaning of the cross price elasticity in this case.Note that the product you produce is a Pallet. This requires a calculation.(4 Points)
What is the income elasticity?This requires a calculation.(4 Points
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