The demand for Wanderlust Travel Services (X) is estimated to be Qx=22,000-2.5px+4Py-1M+1.5Ax, where Ax represents the amount of advertising spent on X and the other variables have their usual interpretations. Suppose the price of good X is $450, good Y sells for $40, the company utilizes 3,000 units of advertising, and consumer income is $20,000.
a.Calculate the own price elasticity of demand at these values of prices, income, and advertising.
b.Is demand elastic, inelastic, or unitary elastic?
c.How will your answers to parts a and b change if the price of Y increases to $50?
a. Calculate the own price elasticity of demand at these values of prices, income, and advertising.
Put Px=450, Py=40, Ax=3000, M=20000
Absolute value of own price elasticity of demand is assessed.