4. Assume that the demand for good B is given by the following demand function: (3 marks) QB = 40 - 6P8 +0.9Y - 2PA + 1.

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4 Assume That The Demand For Good B Is Given By The Following Demand Function 3 Marks Qb 40 6p8 0 9y 2pa 1 1 (145.5 KiB) Viewed 30 times

4. Assume that the demand for good B is given by the following demand function: (3 marks) QB = 40 - 6P8 +0.9Y - 2PA + 1.4Pc + 13QUB Where le is the demand for good B; Pg Is its price; Y is consumer income; PA and Pc are the prices of other goods and QUB is the quality of good B. Assume that PB = 3; Y = 1000; PA = 5; Pc = 5; QUg = 6. = Which of the following correctly provides the relevant elasticities of demand and the correct explanation? YED is income elasticity of demand; CEDec is cross price elasticity of demand between goods B and C and QuEDg is the quality elasticity of demand for good B. (a) YED = 8.49; CEDBC = 0.066; QUEDA = 0.736. Good B is a normal good, goods B and C are complements; there is a positive impact on demand for good B from quality improvements. (b) YED = 0.9; CEDBC = 0.094; QUEDE = 13. Good B is a normal good; goods B and Care substitutes, there is a positive impact on demand for good B from quality improvements. (c) YED = 8.49; CEDBC = 0.066; QUED = 0.736. Good B is a normal good, goods B and Care substitutes; there is a positive impact on demand for good B from quality improvements. (d) YED = 0.9; CEDBC = 0.094; QUEDB = 13. Good B is a normal good; goods B and Care substitutes; there is a positive impact on demand for good B from quality improvements. =