Essay
The demand for Wanderlust Travel Services (X)is estimated to be Qx = 22,000 - 2.5Px + 4Py - 1M + 1.5Ax,where Ax represents the amount of advertising spent on X and the other variables have their usual interpretations.Suppose the price of good X is $450,good Y sells for $40,the company utilizes 3,000 units of advertising,and consumer income is $20,000.
a.Calculate the own price elasticity of demand at these values of prices,income,and advertising.
b.Is demand elastic,inelastic,or unitary elastic?
c.How will your answers to parts a and b change if the price of Y increases to $50?
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a.Qx = 22,000 − 2.5 (450)+ 4(40)− 1(20,00...View Answer
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