Question

q1=1000-150p+2y+20p2 if current prices good 1 is 5 birr the price of good 2 is 8 birr and par capital of income is 500 birr where Q1is quantity of good 1 demand, p1 is prices of good 1, p2 is price of good 2,and Y is per capita income of the consumer then calculate prices elasticity of demand

Answer 1

$q_1=1000-150p+2y+20p_2\\q_1=1000-150(5)+2(500)+20(160)\\=1000-750+1000+160\\=1410$

$e_{(p)}\frac{\frac{Q_1-Q_0}{(Q_1+Q_0)/2}}{\frac{P_1-P_0}{(P_1+P_0)/2}}$

e_p=price elasticity

Q₁=quantity of the demanded good 1

p₁=price of the demanded good 1

Q₀=initial quantity

p₀=initial price

$e_{(p)}\frac{\frac{1410-0}{(1410+0)/2}}{\frac{5-0}{(5+0)/2}}\\=\frac{\frac{1410}{750}}{\frac{5}{2.5}}\\=\frac{2}{2}\\=1$