Suppose that the demand for pencils by a representative consumer is given by X = 19.4 + 0.4M – 8p + 2pf where x is quant
Posted: Thu May 26, 2022 7:25 am
Suppose that the demand for pencils by a representative consumer
is given by
X = 19.4 + 0.4M – 8p + 2pf
where x is quantity demanded of pencils, M is income in thousands
of Ringgit Malaysia
(RM), p is price of pencils in RM, and pf is price of fountain pens
in RM.
The values of these variables for the consumer are:
x = 25
M = 20
P = RM0.8
Pf = RM2
a) Calculate the price elasticity of demand, cross-price
elasticity, and income elasticity
of demand for pencils, given this information.
b) Suppose that an increase in the price of ink re-fills result in
a 10% increase in the
price of a fountain pen. What will be the percentage increase in
the quantity
demanded of pencils?
steps by steps working
is given by
X = 19.4 + 0.4M – 8p + 2pf
where x is quantity demanded of pencils, M is income in thousands
of Ringgit Malaysia
(RM), p is price of pencils in RM, and pf is price of fountain pens
in RM.
The values of these variables for the consumer are:
x = 25
M = 20
P = RM0.8
Pf = RM2
a) Calculate the price elasticity of demand, cross-price
elasticity, and income elasticity
of demand for pencils, given this information.
b) Suppose that an increase in the price of ink re-fills result in
a 10% increase in the
price of a fountain pen. What will be the percentage increase in
the quantity
demanded of pencils?
steps by steps working