Answer to Question #38991 in Economics of Enterprise for marvi

Question

the demand equation is estimated to be 50 - 3p + 2po where po is the price of other good. assume the average value of P is $3 and the average value of po is $6.
a. what is the price elasticity at the average values of P and Po? how should the price of the good can changed to increase total revenues?
b. what is the cross elasticity at the average values of P and Po? what is the relationship between the two goods?
c. if equation is correctly estimated is good inferior a necessity or a luxury? Explain.

Answer 1

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