The demand curve for a product is given by QXd = 1,200 - 3PX - 0.1PZ where Pz = $300.

a. What is the own price elasticity of demand when Px = $140? Is demand elastic or inelastic at this price? What would happen to the firm's revenue if it decided to charge a price below $140?

Instruction: Round your response to 2 decimal places.

Own price elasticity:

Demand is:

If the firm prices below $140, revenue will:

b. What is the own price elasticity of demand when Px = $240? Is demand elastic or inelastic at this price? What would happen to the firm's revenue if it decided to charge a price above $240?

Instruction: Round your response to 1 decimal place.

Own price elasticity:

Demand is:

If the firm prices above $240, revenue will:

c. What is the cross-price elasticity of demand between good X and good Z when Px = $140? Are goods X and Z substitutes or complements?
Instruction: Round your response to 2 decimal places.

Cross-price elasticity:

Goods X and Z are:

Solution Preview

The demand curve for a product is given by QXd = 1,200 - 3PX - 0.1PZ where Pz = $300.

a. What is the own price elasticity of demand when Px = $140? Is demand elastic or inelastic at this price? What would happen to the firm's revenue if it decided to charge a price below $140?

QXd=1200-3PX-0.1PZ
Put Pz=300
QXd=1200-3PX-0.1*300=1170-3PX

Differentiate with respect to PX we get
d(QXd)/dPX=-3

Now calculate QXd at Px=$140
QXd=1170-3PX=1170-3*140=750

Own price elasticity of demand=Ep=d(QXd)/dPX*(Px/QXD)=-3*(140/750) =-0.56

Own ...

Solution Summary

Solution depicts the steps to estimate the elasticity coefficients in the given case.

Using the midpoints formula, calculate theelasticity coefficient for each price level, starting with the coefficient for the
Price Quantity Total Elasticity Elastic or
Demanded Revenue Coefficient Inelastic
$4 100

With respect to the price elasticity of demand, construct a graph using the data in figure 1. Illustrate the ranges on the demand curve that indicate elastic, inelastic, and unitary elasticity. Explain your answers. Enter non-numerical responses in the same worksheet using tax boxes.
Quantity total

See the attached file. Using the midpoint formula, calculate elasticity for each of the given changes in demand by a household.
P1 P2 Q1 Q2
Demand for:
a. Long-distance telephone service $0.25/min $0.15/min 300min/month 400min/mth
b. Orange jui

What is cross-price elasticity? Explain why the results of calculating cross-price elasticity can be useful in determining product relationships. In your explanation, contrast the different numerical values of cross-price elasticity and what each value indicates.

Your company has developed a drug called Matrox that is an effective treatment for migraine headaches. You have just discovered that it can also be used for organ transplant patients to reduce the risk of organ rejection. The demand for migraine medications is considerably more
elastic than the demand for drugs to reduce the ri

If income declines by 2.85 percent, how much do I have to cut price in order to maintain existing customers?
It starts with being given a regression analysis that has the following: coefficient of the intercept is .45, the coefficient of the natural logarithm of price is -2.14, and the natural logarithm of income is .90. Bas

Please help with the answer to this question.
Elasticity can be defined as percentage change in demand for a 1% change in decision attribute. For linear aggregate demand, what is the mathematical representation/formula for this statement? You must define the parameters you choose to use for this answer. ____