The demand curve for a product is given by Qd = 1,200 - 3Px - 0.1Pz where Pz = $300. a. What is the own price elasticity of demand when Px = $140? Is demand elastic or inelastic at this price? What would happen to the firm's revenue if it decided to charge a price below $140? b. What is the own price elasticity of demand when Px = $240? Is demand elastic or inelastic at this price? What would happen to the firm's revenue if it decided to charge a price above $240? c. What is the cross-price elasticity of demand between good X and good Z when Px = $140? Are goods X and Z substitutes or complements?
Added by Anita V.
Step 1
The own price elasticity of demand (Ed) is calculated as follows: Ed = (dQd/dPx) * (Px/Qd) First, we need to find dQd/dPx, which is the derivative of the demand function with respect to Px. In this case, dQd/dPx = -3. Show more…
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