1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
zaharov [31]
3 years ago
14

Suppose the demand function for good X is given by: Q_dx = 15-0 5P_x - 0.8 P y where Q_dx is the quantity demanded of good X, P_

x is the price of good X, and P_y is the price of good Y, which is related to good X. a. Using the midpoint method, if the price of good Y is $10 and the price of good X decreases from $5 to $3, what is the price elasticity of demand for good X? Is the demand elastic, unitary elastic, or inelastic? b. Good X and Good Y are related as c. Using the midpoint method, if the price of good X is $10 and the price of good increases from $8 to $10, the cross price elasticity of demand is about
Business
1 answer:
Bogdan [553]3 years ago
7 0

Answer:

a. Price elasticity of demand for good X is -0.80; and the demand is inelastic.

b. Good X and Good Y are related as complements.

c. The cross price elasticity of demand is about -2.57%.

Explanation:

Note: There is an error in the demand function for good X. This is therefore corrected by restating the function as follows:

Q_dx = 15 - 0.5P_x - 0.8 P_y …………………………… (1)

a. Using the midpoint method, if the price of good Y is $10 and the price of good X decreases from $5 to $3, what is the price elasticity of demand for good X? Is the demand elastic, unitary elastic, or inelastic?

From the question and equation (1), we have:

Old price of good X = Old P_x = $5

New price of good X = New P_x = $3

New quantity demanded of good X = New Q_dx = 15 - (0.5 * 3) - (0.8 * 10) = 5.50

Old quantity demanded of good X = New Q_dx = 15 - (0.5 * 5) - (0.8 * 10) = 4.50

Ordinarily, the formula for calculating the price elasticity of demand is as follows:

Price elasticity of demand = Percentage change in quantity demanded of good X / Percentage change in price of good X ................ (1)

Where, based on the midpoint formula, we have:

Percentage change in quantity demanded of good X = {(New quantity demanded of good X - Old

quantity demanded of good X) / [(New quantity demanded of good X + Old quantity demanded of good X) / 2]} * 100 = {(5.50 - 4.50) / [(5.50 + 4.50) / 2]} * 100 = 20%

Percentage change in price = {(New price of good X - Old price of good X) / [(New price of good X + Old Price of good X) / 2]} * 100 = {(3 - 5) / [(3 + 5) / 2]} * 100 = -25%

Substituting the values into equation (1), we have:

Price elasticity of demand for good X = 20% / -25% = -0.80

Therefore, the price elasticity of demand (based on the midpoint formula) when price decreases from $5 to $3 is -0.80.

Since the absolute value of the price elasticity of demand for good X i.e. |-0.80| is less than one, the demand is inelastic.

b. Good X and Good Y are related as

From equation (1) above, the coefficient P_Y is -0.80 which shows that it has a negative sign.

The negative sign indicates Good X and Good Y are related as complements. This implies that as price of Good Y falls, the quantity demand of Good X increases.

c. Using the midpoint method, if the price of good X is $10 and the price of good Y increases from $8 to $10, the cross price elasticity of demand is about

From the question and equation (1), we have:

Old price of good Y = Old P_y = $8

New price of good Y = New P_y = $10

New quantity demanded of good X = New Q_dx = 15 - (0.5 * 10) - (0.8 * 10) = 2

Old quantity demanded of good X = New Q_dx = 15 - (0.5 * 10) - (0.8 * 8) = 3.60

Ordinarily, the formula for calculating the cross price elasticity of demand is as follows:

Cross price elasticity of demand of goods X and Y = Percentage change in quantity demanded of good X / Percentage change in price of good Y ................ (2)

Where, based on the midpoint formula, we have:

Percentage change in quantity demanded of good X = {(New quantity demanded of good X - Old

quantity demanded of good X) / [(New quantity demanded of good X + Old quantity demanded of good X) / 2]} * 100 = {(2 - 3.60) / [(2 + 3.60) / 2]} * 100 = -57.1428571428572

Percentage change in price of good Y = {(New price of good Y - Old price of good Y) / [(New price of good Y + Old Price of good Y) / 2]} * 100 = {(10 - 8) / [(10 + 8) / 2]} * 100 = 22.2222222222222

Substituting the values into equation (2), we have:

Cross price elasticity of demand of good X and Y = -57.1428571428572 / 22.2222222222222 = -2.57142857142857

Rounding to 2 decimal places, we have:

Cross price elasticity of demand of good X and Y = -2.57

Therefore, the cross price elasticity of demand is about -2.57%.

Note: This confirms that the relationship between Good X and Good Y is complement because the cross-price elasticity between them is negative. That is, an increase in the price of Good Y makes consumer to buy less of Good X which is a complement.

You might be interested in
The best supplier will depend on the type of business. Explain how a business that specializes in supplying plumbers would have
IgorLugansk [536]

Answer:

the $$$ of the different thing will play a big part

7 0
3 years ago
To enhance your ability to assess and manage risk in specific driving situations, you should:_____.
kaheart [24]

To enhance our ability to assess and manage risk in specific driving situations we should assume that a dangerous situation may occur.

Given an incomplete sentence related to the ability to manage and assess the risk in specific driving situations.

We are required to fill the blank given in the sentence so that the sentence will give adequate meaning.

The words which are to be filled in the sentence are "assume that a dangerous situation may occur",

While driving there is a risk of accident so when someone is assessing the risk of specific driving then he has to take in consideration that any dangerous situation can occur. We know that the thinking that the accident may occur is negative but an analysts has to think multidimensional.

Hence to enhance our ability to assess and manage risk in specific driving situations we should assume that a dangerous situation may occur.

Learn more about risk at brainly.com/question/24129294

#SPJ4

7 0
1 year ago
Please help, easy multiple choice question<br>whoops meant to put it in art
AVprozaik [17]

Answer: The answer that is correct is the last one, which is shape.

I hope this helped!

5 0
2 years ago
Read 2 more answers
A hospital revenue bond issue is being underwritten on a negotiated basis. The offering consists of $20,000,000 par value of ter
Arlecino [84]

Answer: B. $12.00

Explanation:

Normally the syndicate member is to earn both the additional takedown amount as well as the selling concession should they find the customers.

If a selling group finds the customers however as was the case here, the syndicate member will only earn the additional takedown amount of $12 per bond.

3 0
3 years ago
International Business, Inc. (IBI), agrees to assume a debt of Southern Export Company to First National Bank. This promise is f
pogonyaev

Complete Question:

International Business, Inc. (IBI), agrees to assume a debt of Southern Export Company to First National Bank. This promise is for the benefit of IBI. To be enforceable, the promise must be in writing if the debt is for O $5,000.none of the above. $50. $500.

Answer:

none of the above.

Explanation:

The choices do not provide any clue for further explanation.  However, one can identify that the promise to assume a debt is a contract.   For most business contracts to be enforceable, there is the need for the promise to be in writing.  This provides a documented evidence which can be tendered in the court of law.  It is a known adage that a short pen is greater than a long memory.  So, exchange of promises or consideration is better done in writing form than orally.

3 0
3 years ago
Other questions:
  • The economic burden of a tax:
    13·1 answer
  • Which of the following is not correct? a. The consumer price index gives economists a way of turning dollar figures into meaning
    7·1 answer
  • You have an opportunity to invest in Australia at an interest rate of 8%. Moreover, you expect the Australian dollar (A$) to app
    12·1 answer
  • Coca-Cola Unbottled is an online forum where Coke fans and company insiders can "look at what's beyond the bottle," sharing post
    15·1 answer
  • A company produces 100 cars in the year 2017 but only manages to sell 90 of the cars. In the year 2018 they sell the 10 cars tha
    8·1 answer
  • For each of the items indicate whether its amount affects the bank or book side of a bank reconciliation and is an addition or a
    11·1 answer
  • Last month, when 10,000 units of a product were manufactured, the cost per unit was $60. At this level of activity, variable cos
    5·1 answer
  • What is 40 divided by 31
    8·2 answers
  • Many firms securely share relevant​ sales, inventory, product​ development, and marketing information with suppliers and other e
    14·1 answer
  • Presented below are certain account balances of Nash Products Co. Rent revenue $ 7,390 Sales discounts $ 8,110 Interest expense
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!