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Fynjy0 [20]
2 years ago
6

Suppose the demand for good x is lnqxd = 21 - .8lnpx - 1.6lnpy + 6.2lnm + .4lnax. then we know that the own-price elasticity for

good x is:
Business
1 answer:
serg [7]2 years ago
5 0

Answer: Inelastic

Explanation:

The coefficients in a log-log model represent the elasticity of your dependent variable with respect to your independent variable. In other words, the coefficient in a log-log demand model is the estimated percent change in Q_{xd} with respect to a percentage change in the independent variables like P_{x}, P_{y}, M, A_{x}, etc.

Thus, coefficient of P_{x} represents the elasticity of demand for good X with respect to Price of good x. So, Own-price elasticity of good x is 0.8.

Since this is less than 1 the good is relatively inelastic.

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