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Assume that demand for product A can be expressed as QA = 500 ¨C 5PA + 3PB and demand for product B can be expressed as QB = 300 ¨C 2PB + PA. Currently, market prices and quantities for these goods are PA, = 5, PB = 2, QA = 481, and QB = 301. 

a. Suppose the price of product B increases to 3. What happens to the quantity demanded of both products? 

b. find out the arc cross©\elasticity between product A and product B using prices for product B of 2 and 3. 

c. Are these goods substitutes or complements?

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M998366

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