2. Elasticity Consider the following demand equation for good a. Good a demands is a function of income (Y) and prices of good b and c. Q?(p, Y, Po, Pe) = 12 – 3pa + 5Y – 3p, + 4p.. Pa = 2 Y=500 P = 3...

2. Elasticity<br>Consider the following demand equation for good a. Good a demands is a function of<br>income (Y) and prices of good b and c.<br>Q?(p, Y, Po, Pe) = 12 – 3pa + 5Y – 3p, + 4p..<br>Pa = 2<br>Y=500<br>P = 3<br>P = 5<br>a. Calculate elasticity of demand. Does it respect law of demand? is it elastic or inelastic?<br>Why?<br>b. Calculate elasticity of income. Is it inferior or nomal good? Why?<br>c. Calculate cross-price elasticities with good b. Is good b a complement or substitute?<br>Why?<br>d. Calculate cross-price elasticities with good c. Is good c a complement or substitute?<br>Why?<br>

Extracted text: 2. Elasticity Consider the following demand equation for good a. Good a demands is a function of income (Y) and prices of good b and c. Q?(p, Y, Po, Pe) = 12 – 3pa + 5Y – 3p, + 4p.. Pa = 2 Y=500 P = 3 P = 5 a. Calculate elasticity of demand. Does it respect law of demand? is it elastic or inelastic? Why? b. Calculate elasticity of income. Is it inferior or nomal good? Why? c. Calculate cross-price elasticities with good b. Is good b a complement or substitute? Why? d. Calculate cross-price elasticities with good c. Is good c a complement or substitute? Why?

Jun 08, 2022

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2. Elasticity Consider the following demand equation for good a. Good a demands is a function of income (Y) and prices of good b and c. Q?(p, Y, Po, Pe) = 12 – 3pa + 5Y – 3p, + 4p.. Pa = 2 Y=500 P = 3...

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