Suppose the demand for good x is lnQ_x^d = 21

Question

Suppose the demand for good x is lnQ_x^d = 21 - 0.8 lnP_x - 1.6 lnP_y + 6.2 lnM + 0.4 lnA_x.Then we know that the own-price elasticity for good x is: A)unitary. B)elastic. C)inelastic. D)cannot be calculated from the existing information.

Quizplus · Accepted Answer

The own-price elasticity is the coefficient of lnP_x, which is -0.8. Since the absolute value is less than 1, the demand is inelastic.

Suppose the Demand for Good X Is LnQxd = 21