question archive The daily demand for Invigorated PED shoes is estimated to be Qdx = 100−3Px + 4Py −

The daily demand for Invigorated PED shoes is estimated to be Qdx = 100−3Px + 4Py −

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The daily demand for Invigorated PED shoes is estimated to be Qdx = 100−3Px + 4Py − .01M + 2Axwhere Ax represents the amount of advertising spent on shoes (X), Px is the price of good X, Py is the price of good Y, and M is average income. Suppose good X sells at $25 a pair, good Y sells at $35, the company utilizes 50 units of advertising, and average consumer income is $20,000. Calculate and interpret the own price, cross-price, and income elasticities of demand.

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Answer:

The daily demand for Invigorated PED shoes is estimated to be Qdx = 100−3Px + 4Py − .01M + 2Ax

where Ax represents the amount of advertising spent on shoes (X), Px is the price of good X, Py is the price of good Y, and M is average income. Suppose good X sells at $25 a pair, good Y sells at $35, the company utilizes 50 units of advertising, and average consumer income is $20,000. Calculate and interpret the own price, cross-price, and income elasticities of demand.

Explanation:

The daily demand for Invigorated PED shoes is estimated to be Qdx = 100−3Px + 4Py − .01M + 2Ax

where Ax represents the amount of advertising spent on shoes (X), Px is the price of good X, Py is the price of good Y, and M is average income. Suppose good X sells at $25 a pair, good Y sells at $35, the company utilizes 50 units of advertising, and average consumer income is $20,000. Calculate and interpret the own price, cross-price, and income elasticities of demand.

 

 

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