Answer to Question #74466 in Microeconomics for Mesfin Tesfaye
Suppose demand for good A is given by DA = 500 - 10 Pa + 2 Pb + 0.70I where Pa is the
price of good A, Pb is the price of some other good B, and I is income. Assume that Pa is
currently $10, Pb is currently $5, and I is currently $100.
a. What is the elasticity of demand for good A with respect to the price of good A at the
current situation? Interpret the nature of elasticity of demand.