Suppose that initially Px = 2, Py = 8, I = 96 and the Marshallian demand function for good0.510.5PxY is given by Y* =Py0.5. Calculate the own price & income elasticities ofPydemand for good Y. Interpret your computed values and say something about the type ofgood.

The dd function for commodity Y is, Y = 0.5I/Py + 0.5Px/Py - 0.5 = 0.5 [(I+Px)/Py - 1] It is given…

Suppose that initially Px = 2, Py = 8, I = 96 and the Marshallian demand function for good Y is given by Y* 0.51 0.5Px 0.5. Calculate the own price & income elasticities of %3D | Py Py demand for good Y. Interpret your computed values and say something about the type of good.

Suppose that initially Px = 2, Py = 8, I = 96 and the Marshallian demand function for good Y is given by Y* 0.51 0.5Px 0.5. Calculate the own price & income elasticities of %3D | Py Py demand for good Y. Interpret your computed values and say something about the type of good.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter5: Price Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 16SQ

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Question

Suppose that initially Px = 2, Py = 8, I = 96 and the Marshallian demand function for good
0.51
0.5Px
Y is given by Y* =
Py
0.5. Calculate the own price & income elasticities of
Py
demand for good Y. Interpret your computed values and say something about the type of
good.

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