Suppose Q _x^d = 10,000 − 2 P_x + 3 P_y − 4.5M,where P_x = $100,P_y = $50,and M = $2,000.Then good X has a demand which is: A) elastic. B) inelastic. C) unitary. D) neither elastic, inelastic, nor unitary elastic.

Question

Quizplus · Accepted Answer

To determine the elasticity of demand for good X, we need to calculate the price elasticity of demand (PED) using the formula: PED = (%change in quantity demanded) / (%change in price) Since the equation given does not provide information about percentage changes, we cannot directly calculate the PED. However, we can analyze the coefficient of P_x, which represents the price of good X. The coefficient of P_x is negative (-2), which means that as the price of good X increases, the quantity demanded of good X decreases. However, the magnitude of the coefficient (-2) suggests that the change in quantity demanded is not very sensitive to the change in price. This indicates an inelastic demand curve for good X. Therefore, the answer is B) inelastic.

Suppose Q xd = 10,000 − 2 Px + 3

Suppose Q _x^d = 10,000 − 2 P_x + 3