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    Calculate the own price elasticity of demand

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    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?

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    https://brainmass.com/economics/elasticity/calculate-the-own-price-elasticity-of-demand-304279

    Solution Preview

    a. Calculate the own price elasticity of demand at these values of prices, income, and advertising.
    Qx=22,000-2.5px+4Py-1M+1.5Ax
    Put Px=450, Py=40, Ax=3000, M=20000
    Qx=22000-2.5*450+4*40-1*20000+1.5*3000
    ...

    Solution Summary

    Absolute value of own price elasticity of demand is assessed.

    $2.19

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