The demand for company Razwan’s is Qx = 12 – 3Px + 4Py. Suppose good X sells for RM3.00 per unit and good Y sells for RM 1.50 per unit. Calculate the cross-price elasticity of demand between goods X and Y at the given prices. Are goods X and Y substitutes or complements? What is the own price elasticity of demand at these prices?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
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Chapter3: Demand Analysis
Section: Chapter Questions
Problem 6E
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The demand for company Razwan’s is Qx = 12 – 3Px + 4Py. Suppose good X sells for RM3.00 per unit and good Y sells for RM 1.50 per unit.

  1. Calculate the cross-price elasticity of demand between goods X and Y at the given prices.
  2. Are goods X and Y substitutes or complements?
  3. What is the own price elasticity of demand at these prices?
  4. How would your answers to parts a and c change if the price of X dropped to RM2.00 per unit?
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