Purchase Solution

Predicting Changes in Demand

Not what you're looking for?

Ask Custom Question

Question: Suppose that the price elasticity of demand for good X is -2, its income elasticity is 3, its advertising elasticity is 4, and the cross price elasticity of demand between it and good Y is -6. Determine how much consumption changes if:

a) The price of good Y increases by 10%
b) Advertising decreases by 2%
c) Income falls by 3%

Purchase this Solution

Solution Summary

This solution describes the steps required for determining the changes in demand for the corresponding changes in the price of a good, advertising expenditure and consumer income based upon given elasticity values. All calculations are provided.

Solution Preview

Solution:

a) The price of good Y increases by 10%

Cross Price elasticity of demand = -6
% change in price of good Y = 10%
% change in demand(consumption) of good X = cross price elasticity of demand*% change in price of good Y.
= ...

Solution provided by:
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution


Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.