Part A. Suppose the demand for a product A is given by the following function: QA = 500 - 250*PA - 50*PB. Calculate the cross-price elasticity, if you know the following information: Price per product A (EUR) Price per product B (EUR) Quantity of A Cross-Price Elasticity of Demand (EAB) Comment 1.2 3.5 EBA < 0 meaning A and B are complemets 25 -7
Part A. Suppose the demand for a product A is given by the following function: QA = 500 - 250*PA - 50*PB. Calculate the cross-price elasticity, if you know the following information: Price per product A (EUR) Price per product B (EUR) Quantity of A Cross-Price Elasticity of Demand (EAB) Comment 1.2 3.5 EBA < 0 meaning A and B are complemets 25 -7
Chapter20: Elasticity: Demand And Supply
Section: Chapter Questions
Problem 13E: Using the following equation for the demand for a good or service, calculate the price elasticity of...
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Part A. Suppose the demand for a product A is given by the following function: QA = 500 - 250*PA - 50*PB. Calculate the cross-price elasticity, if you know the following information:
Price per product A (EUR) | Price per product B (EUR) | Quantity of A | Cross-Price |
Comment |
1.2 | 3.5 | EBA < 0 meaning A and B are complemets | ||
25 | -7 |
Part B. Suppose the demand is given by the following function: Q = 2000 - 250*P. At what price per item of this product can total revenues be maximized? Fill in the Table gaps:
Demand function | Direct Price Elasticity | Price per product (EUR) |
Q = 2000 - 250P | |E| = 1 (if TRmax) | 250*P = 2000 - 250*P |
|E| = |-250*P/(2000 - 250*P)| = 1 | 500*P = 2000 | |
|-250*P| = |2000 - 250*P| | P = 2000/500 | |
P = 4 |
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