You are given the following equation for the market demand function for product X:
QD=500-20Px+0.002I-10Py

Where QD=quantity of X demanded per year
Px=price per unit of product X
I=average income per year
Py=price per unit of product Y

a) Is X a superior (normal), neutral or inferior good? Why?
b) Is Y a substitute for, complement to, or independent of, X? Why?
c) What Px causes the demand for X to fall to zero?
d) How much X would the market demand if X was given away for free?
e) What must Px be if 50 units of X are to be sold per time period?
f) Suppose Px =10. What is the price elasticity of demand for X?

a) Coefficient of I is 0.002. It is a positive value. It means that for every increase of a dollar in income, demand will increase by 0.002 units. Since consumption of X is increasing with increases in income, we can say that X is a normal good.

b) ...

Solution Summary

Solution predicts the nature of the good in consideration and related good with the help of given demand equation. It also estimates the quantity demanded at given prices. At last it depicts the steps to calculate the price elasticity of demand.

1. A market consists of two individuals. Their demand equations are Q1 = 16-4P and Q2 = 20-2P respectively.
a. What is the marketdemand equation?
b. At a price of $2, what is the point price elasticity for each person and for the market?

Demand for cassettes can be characterized by the following point elasticities:price elasticity =-2,cross price elasticity with aaa batteries is -1.5, and income elasticity =3. please explain the following statement.
a. A 3% price reduction in cassette players would be necessary to overcome the effects of a 2% decline in inco

How will each of the following affect the position of the demand curve for videocassette recorders (VCRs)?
a. An increase in the price of VCR tapes.
b. A decrease in the price of VCRs.
c. An increase in per capita income.
d. A decrease in the price of movie tickets.

Suppose the price of apples rises from $3 a pound to $3.45 and your consumption of apples drops from 30 pounds of apples a month to 21 pounds of apples. Calculate your price elasticity of demand of apples. What can you say about your price elasticity of demand of apples? Is it elastic, inelastic, or unitary elastic?

In the imperfect competitive market of jeans, Lean Jeans, Inc., recently offered rebates of $1 off the regular $50 price. Quantity sold jumped 4 more jeans from the previous 100 figure the previous month.
A. Calculate the arc price elasticity of demand for Lean Jeans.
Based on the previous question and using markup pricin

1. Suppose the marketdemand curve for a Product is given by Q = 250 - 5P and the market supply curve is given by Q = -50 + 25P.
1. What are the equilibrium priceand quantity in this market?
2. At the market equilibrium, what is the price elasticity of demand?
3. Suppose the price in this market is $8. What is the amou

A problem do to study for....
Suppose the own price elasticity of marketdemand for retail gasoline is -0.9 and Rothschild Index is 0.6 and a typical gasoline retailer enjoys sales of
$1.2 Million annually. What is the price elasticity of demand of a representative gasoline retailer's product?

Quantity Price Elasticity
Demanded
100 $ 5
80 $10
60 $15
40 $20
20 $25
10 $30
1. Determine the price elasticity of demand at each quantity demanded using the formula % chg in QD divided by % chg in price.
2. Redo #1 using price changes of $

You decided to open a restaurant, named FunMeal. FunMeal is a fast food restaurant with a very limited menu. It serves only a steak sandwich on a whole-wheat roll plus a salad with any beverage of the customer's choice. Normally the sandwich, salad and beverage meal sells for $12.00
and the average number of meals sold per mon