The daily demand for Invigorated PED shoes is estimated to be g = 100–3P, + 4P, –.01M +24, where A, represents the amount of advertising spent on shoes (X), P, is the price of good X, P, is the price of good Y, and M is average income. Suppose good X sells at Rs.50 a pair, good Y sells at Rs.70, the company utilizes 100 units of advertising, and average consumer income is Rs.40,000. Calculate and interpret 1. Own Price Elasticity of demand 2. Cross Price Elasticity of demand 3. Income Elasticity of demand. 4. Are goods X and Y substitutes or complements? 5. Is good Xa normal or an inferior good?

The daily demand for Invigorated PED shoes is estimated to be g = 100–3P, + 4P, –.01M +24, where A, represents the amount of advertising spent on shoes (X), P, is the price of good X, P, is the price of good Y, and M is average income. Suppose good X sells at Rs.50 a pair, good Y sells at Rs.70, the company utilizes 100 units of advertising, and average consumer income is Rs.40,000. Calculate and interpret 1. Own Price Elasticity of demand 2. Cross Price Elasticity of demand 3. Income Elasticity of demand. 4. Are goods X and Y substitutes or complements? 5. Is good Xa normal or an inferior good?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 7E

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