5. The demand for good X is given by this equation: Qx = 1.0-2.0P, +0.81 +1.5P, -3P, +1.0A where Px, Py, and Pz represen

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5 The Demand For Good X Is Given By This Equation Qx 1 0 2 0p 0 81 1 5p 3p 1 0a Where Px Py And Pz Represen 1 (30.02 KiB) Viewed 53 times

5. The demand for good X is given by this equation: Qx = 1.0-2.0P, +0.81 +1.5P, -3P, +1.0A where Px, Py, and Pz represent the prices of goods X, Y, and Z; I measures income per capita; and A is advertising. Currently: P = 2.00, P, = 2.50, P, = 1.00, 1 = 4, and A = 3.05. a. Is good X a necessity or a luxury good? How do you know? (4 marks) b. Calculate the cross elasticity of demand for X with respect to the price of good Z. Are goods X and Z substitutes or complements? (4 marks) c. Calculate the advertising elasticity of demand for X. Interpret your answer. (4 marks) d. What kind of change in the price of X would you recommend if the firm is interested in maximizing revenue? (8 marks) TRU Open Leaming