question archive Suppose the own price elasticity of demand for good X is -2, its income elasticity is 3, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4
Suppose the own price elasticity of demand for good X is -2, its income elasticity is 3, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4
Subject:EconomicsPrice:2.88 Bought3
Suppose the own price elasticity of demand for good X is -2, its income elasticity is 3, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4.
Determine how much the consumption of this good will change if:
a. The price of good X decreases by 6%
b. The price of good Y increases by 8%
c. Advertising decreases by 4%
d. Income increases by 5%
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a) Using the formulas above, we can write:
- 2 = Percentage in Quantity demanded / -6
Hence, the consumption increases by 12%
(b) Using the formulas above, we can write:
- 4 = Percentage in Quantity demanded / 8
Hence, the consumption decreases by 32%
(c) Using the formulas above, we can write:
2 = Percentage in Quantity demanded / -4
Hence, the consumption decreases by 8%
(d) Using the formulas above, we can write:
3= Percentage in Quantity demanded / 5
Hence, the consumption increases by 15%
