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# Answer to Question #39432 in Macroeconomics for Sarah

Question #39432
The demand for Wanderlust Travel Services (X) is estimated to be: QX =22,000–2.5PX +4PY –M+1.5AX where AX represents the amount of advertising spent on X, M is income per capita, and the other variables have their usual interpretations. Suppose that the price of good X is \$450, good Y sells for \$40, the company utilizes 3000 units of advertising, and consumer income is \$20,000. A. Calculate the elasticity of demand for good X with respect to the price of X, the price of Y, income, and advertising. B. Should the price of good X be raised to increase total revenue? Explain why or why not. C. Calculate consumer surplus at the profit‐maximizing price if the marginal cost is \$264.
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2014-02-26T11:05:29-0500

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