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Income Elasticity of Demand and Cross Elasticity of Demand

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Demand function for product: Qd = 500 - 2P + 3Pr + 0.1N, where P is price, Pr is price of related good, and N is per capita disposable income. Assume P = $10, Pr = $20, and N = $6,000.

A. Income elasticity of demand at N = $6,000? (Show Work)

B. Cross elasticity of demand given Pr = $20? (Show Work)

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Solution Preview

Demand function for product: Qd = 500 - 2P + 3Pr + 0.1N, where P is price, Pr is price of related good, and N is per capita disposable income. Assume P = $10, Pr = $20, and N = $6,000.

A. ...

Solution Summary

The expert examines income elasticity of demand and cross elasticity of demand.

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