Given the demand function Q_X = 5,000 - 250P_X +120P_Y +.04I where
P_Y= $50.00 and I = $60,000. When the price of good X is increased from $30.00 to $40.00, we know that demand for good X over this range is:

Question

Quizplus · Accepted Answer

The demand for good X is considered elastic if the percentage change in quantity demanded is greater than the percentage change in price, which is indicated by the demand function's sensitivity to price changes. Since the demand function includes a negative coefficient for the price of good X (-250), it shows that as the price increases, the quantity demanded decreases, which is a characteristic of elastic demand. Additionally, the demand being responsive to price changes is a characteristic of elastic demand, hence both A and D are correct, making E the correct choice.

Given the Demand Function QX = 5,000 - 250PX +120PY

Given the Demand Function Q_X = 5,000 - 250P_X +120P_Y