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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?

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