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Elasticities of demand and supply: Calculation Methods

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How can we calculate the elasticities of demand from a demand function, and elasticities of supply from a supply function ?

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Solution Summary

In this solution, it is shown how elasticities of demand and supply are calculated. The elasticities shown in the calculation are: price elasticity of demand, income elasticity of demand and advertising elasticity of demand.

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QUESTIONS:

1. Given the following demand function, calculate the following:
a. Price elasticity of demand
b, Income elasticity of demand
c. Advertising elasticity of demand

Qx = -1000Px + 100Y + 0.08Pop -1,000,000i + 0.01A

2. Given the following supply function, calculate the elasticity of supply.
Qx = 4000Px -3700PT -50,000PL - 400,000i -1000T

Solution to question 1:

a) The formula for the price elasticity of demand is:

ηd = ...

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