Exercise 2. The demand curve for a product is given Qd = 1500 − 5Px − 0.2Pz by where Pz = $300. What is the own-price elasticity of demand when Px = $200? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price below $200? What is the own-price elasticity of demand when Px = $125? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price above $125? What is the cross-price elasticity of demand between good X and good Z when Px =$125? What about when Px = $200? Are goods X and Z substitutes or complements?
Exercise 2. The demand curve for a product is given Qd = 1500 − 5Px − 0.2Pz by where Pz = $300. What is the own-price elasticity of demand when Px = $200? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price below $200? What is the own-price elasticity of demand when Px = $125? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price above $125? What is the cross-price elasticity of demand between good X and good Z when Px =$125? What about when Px = $200? Are goods X and Z substitutes or complements?
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter20: Consumer Choice And Elasticity
Section: Chapter Questions
Problem 13CQ: Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a....
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Exercise 2. The demand curve for a product is given Qd = 1500 − 5Px − 0.2Pz by where Pz = $300.
- What is the own-price
elasticity of demand when Px = $200? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price below $200? - What is the own-price elasticity of demand when Px = $125? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price above $125?
- What is the cross-price elasticity of demand between good X and good Z when Px =$125? What about when Px = $200? Are goods X and Z substitutes or complements?
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