Answer to Question #110785 in Microeconomics for stephanie tarabay

Question #110785
Suppose the own price elasticity of demand for good X is -3, its income elasticity is -2, its advertising elasticity is 3, and the cross-price elasticity of demand between it and good Y is -5. Determine how much the consumption of this good will change if:
a. The price of good X decreases by 7 percent.

b. The price of good Y increases by 8 percent.

c. Advertising decreases by 4 percent.

d. Income increases by 3 percent.
1
Expert's answer
2020-04-20T18:53:26-0400


a).

"-3\u00d77=21"

A negative price Elasticity means that their is an inverse realationship betwen the price change and quantity demanded and therefore,Price decrease by 7% will increase the quanity demanded by 21%


b).

"8\u00d7-5=40"

Price increase by of y 8% will decrease the quanity demanded by 40 percent because good x and y are complementary goods. They are complementary goods because their cross elasticity is negative

c).

"4\u00d73=12"

A positive price elasticity means that

there is positive realationship betwen the quantity demanded and price charged.Advertising decrease by 12%

d).

"-2\u00d73=-6"

Increasing income by 3% decreases the quantity demanded by 6%


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