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2. Elasticity Consider the following demand equation for good a. Good a demands is a function of income (Y) and prices of good b and c. Q (p, Y, рь, р.) %3 12 - Зра + 5Y -Зрь + 4р. %3D Y=500 P = 3 P = 5 a. Calculate elasticity of demand. Does it respect law of demand? is it elastic or inelastic? Why? b. Calculate elasticity of income. Is it inferior or nomal good? Why? c. Calculate cross-price elasticities with good b. Is good b a complement or substitute? Why?

2. Elasticity Consider the following demand equation for good a. Good a demands is a function of income (Y) and prices of good b and c. Q (p, Y, рь, р.) %3 12 - Зра + 5Y -Зрь + 4р. %3D Y=500 P = 3 P = 5 a. Calculate elasticity of demand. Does it respect law of demand? is it elastic or inelastic? Why? b. Calculate elasticity of income. Is it inferior or nomal good? Why? c. Calculate cross-price elasticities with good b. Is good b a complement or substitute? Why?

Principles of Microeconomics (MindTap Course List)
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter5: Elastic And Its Application
Section: Chapter Questions
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2. Elasticity Consider the following demand equation for good a. Good a demands is a function of income (Y) and prices of good b and c. Q?(p, Y, Po, Pe) = 12 – 3pa + 5Y – 3p, + 4p.. Pa = 2 Y=500 P = 3 P = 5 a. Calculate elasticity of demand. Does it respect law of demand? is it elastic or inelastic? Why? b. Calculate elasticity of income. Is it inferior or nomal good? Why? c. Calculate cross-price elasticities with good b. Is good b a complement or substitute? Why? d. Calculate cross-price elasticities with good c. Is good c a complement or substitute? Why?
Transcribed Image Text:2. Elasticity Consider the following demand equation for good a. Good a demands is a function of income (Y) and prices of good b and c. Q?(p, Y, Po, Pe) = 12 – 3pa + 5Y – 3p, + 4p.. Pa = 2 Y=500 P = 3 P = 5 a. Calculate elasticity of demand. Does it respect law of demand? is it elastic or inelastic? Why? b. Calculate elasticity of income. Is it inferior or nomal good? Why? c. Calculate cross-price elasticities with good b. Is good b a complement or substitute? Why? d. Calculate cross-price elasticities with good c. Is good c a complement or substitute? Why?
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