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A firm's demand function for product X has the following question:
Qx = 1420 -20Px- 10Py + 0.02M + 0.04A
where Qx is the quantity purchased, Px is the price of X, Py is the price charged for a related good, M is per capita income, and A is the dollar spent on advertising.

Suppose the firm spends $1200 per week on advertising, that Py=$40 and that income is $8,000 per capita.

a.) Write the equation of the demand curve for product X.
b.) Briefly explain how product X is related to product Y. (Is Y a substitute or a complement, and how can you tell?)
c.) Given the stated values of the other independanct variables, calculate the point price elasticity of demand for X at Px = $50.
d.) Given the stated values of M, A and Py at what price and quantity demanded will total revenue maximized? What will the maximum revenue be?

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9816125

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