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Answer to Question #73568 in Microeconomics for Zulfiqar Ali

Question #73568
The demand equation is estimated to be 50 – 3P + 2Po , where Po is the price of some other good. Assune 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 the equation is correctly estimated, is the good inferiod, a necessity, or a luxury? Explain
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Assignment Expert
16.02.18, 15:57

Dear visitor,
please use panel for submitting new questions

sanchit
16.02.18, 07:37

The demand equation is estimated to be 50 – 3P + 2Po , where Po is the price of some other good. Assune 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?

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