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    Percentage Price Elasticity of Demand

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    Suppose the own price elasticity of demand for good X is -3, its income elasticity is 1, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4. Determine how much the consumption of this good will change if:

    Instructions: Enter your answers as percentages. Include a minus (-) sign for all negative answers.

    a. The price of good X decreases by 5 percent.


    b. The price of good Y increases by 8 percent.


    c. Advertising decreases by 4 percent.


    d. Income increases by 4 percent.


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    Solution Preview

    a. Price elasticity of demand = % change in Q / % change in P = -3
    if price decreases by 1%, quantity will increase by 3%
    therefore, if price decreases by 5%, quantity will increase by ...

    Solution Summary

    Price elasticity of demand is the responsiveness of quantity demanded to a change in price. Solution answers multiple questions on this topic with basic formulae and calculations shown.