🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
Economics
2
answers
0
watching
338
views

A firm has estimated the following demand function for its product:

Q = 100 - 5P + 5I + 15A

Where Q is the quantity demanded per month in thousands, P is product price, I is an index of consumer income, and A is advertising expenditures per month in thousands. Assume that P = $200, I = 150, and A = 30. For simplicity in calculating the results, use the point elasticity formulas to complete the calculations indicated below.

(i) Calculate the quantity demanded.
(ii) Calculate the price elasticity for demand. Is demand elastic, inelastic, or unit elastic?
(iii) Calculate the income elasticity of demand. Is the good normal or inferior?
(iv) Calculate the advertising elasticity of demand.

Watch
2
answers
0
watching
338
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share
Joshua Stredder
Joshua StredderLv10
28 Sep 2019
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

The Klein Corporation’s marketing department, using regression analysis, estimates the firm’s demand function, the result being

Q = -104 - 2.1P + 3.2I + 1.5A + 1.6Z

(R2 = 0.89) where Q is the quantity demanded of the firm’s product (in tons), P is the price of the firm’s product (in dollars per ton), I is per capita income (in dollars), A is the firm’s advertising expenditure (in thousands of dollars), and Z is the price (in dollars) of a competing product. The regression is based on 200 observations.

Klein Corporation’s demand curve-Q=17,526-2.1P

Estimation of the quantity demanded of the Klein Corporation’s product with p=500 is 16,476

Calculate the price elasticity of demand, Income elasticity of demand, cross-price elasticity of demand, and Advertising elasticity of demand for the firm’s product and interpret their results.

Demand for bicycles in the Netherlands is given by

Q = 2, 000 + 15Y − 5.5P
where Y is income in thousands of euros, Q is the quantity demanded of bicycles, and P is the

price per unit in euros. When P = 150 and Y = 15 (i.e., 15,000 euros), find, without using derivatives, (a) Price elasticity of demand (b) Income elasticity of demand

Describe the demand for bicycles in Holland based on your answers above. Is demand elastic? Are bicycles a normal or an inferior good? Luxury or a necessity? How do you think this may compare to demand for bicycles in the US?

Assume that products A and B are produced in competitive markets by different firms and are close substitutes. How would an increase in the price of product A affect the price of product B, and total expenditure on product B? Explain your answer.

Suppose the demand function for a product is Q= 200 -15P + 4I where P is the per unit price of the good, I is median household income in thousands of dollars, and Q is the number of units demanded per month.

a. Is the Law of Demand met? How do you know?

b. Is this good normal or inferior? How do you know?

c. If median family income is $30,000, what is the equation for the demand curve? Calculate point price elasticity at a price of $10. Is demand relatively elastic or inelastic at this price? How do you know?

d. Again assuming that median family income remains at $30,000, calculate arc price elasticity between a price of $10 and $12.

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in