Purchase Solution

Cross Price Elasticity of Demand

Not what you're looking for?

Ask Custom Question

A manufacturer has estimated that the demand for its product as

Qx = 500 - 2Px + .5I + .65Pz - 1.8Py

where Qx is the quantity demand, Px is the price, I is average annual income (currently $14,000). Pz and Py are the prices of related goods. Total costs are given by TC = 3,500,000 + 500Q

Suppose that PZ= $3000 and PY=$250 and that the firm currently charges $2500 for X.

a)(7 pts) At the current values, what is the cross point price elasticity of demand between good X and the substitute good? Interpret the elasticity. Answer given as .4875

Purchase this Solution

Solution Summary

Cross Price Elasticity of Demand is emphasized.

Solution Preview

Point price elasticity of demand between good X and the substitute Good ...

Purchase this Solution

Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.