Suppose that the demand curve for commodity X is X = 25 px¹/2 py¹/3 (3/4 where px = price of x, py = price of y, and I = Consumer's income. (i) Find the own price elasticity of demand for X, the cross-price elasticity of demand for X with respect to the price of Y, and the income elasticity of demand for X. (ii) Determine whether demand for X is elastic or inelastic, whether X and Y are substitutes or compliments and whether X is a normal, an inferior or a luxury good. (iii) Estimate the demand for good X when px = 100, py=125, and I = 10,000

Suppose that the demand curve for commodity X is X = 25 px¹/2 py¹/3 (3/4 where px = price of x, py = price of y, and I = Consumer's income. (i) Find the own price elasticity of demand for X, the cross-price elasticity of demand for X with respect to the price of Y, and the income elasticity of demand for X. (ii) Determine whether demand for X is elastic or inelastic, whether X and Y are substitutes or compliments and whether X is a normal, an inferior or a luxury good. (iii) Estimate the demand for good X when px = 100, py=125, and I = 10,000

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter5: Elasticity

Section: Chapter Questions

Problem 31CTQ: Economists define normal goods as having a positive income elasticity. We can divide normal goods...

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