Answer to Question #39574 in Economics of Enterprise for marvi
the demand equation is estimated to be 50-3P-2Po, where Po is the price of other good. Assume the average value of P is $3 and the average value of Po is $6.
a. what is the price elasticity at the average values of P and Po? how should the price of the good be changed to increase total revenues?
b. what is the cross elasticity at the average values of P and Po? what is the relationship between the two goods?
c. if equation is correctly estimated is good inferior, a necessity or a luxury? Explain.