Hello i Need help with this question, its a multiple one questin with little other question and am having trouble with it all can i please get help to understand the math and the whys.
Working as a consultant to the Pumpkins Producer Association, an agricultural economist from the University of Illinois, - estimates the demand function for Pumpkins as:
Q p = 10 - 5Pp - 2PC + 1.8 Pa + 0.91Y
Where Qp = Quantity of Pumpkins; Pp = Price of Pumpkins/unit; Pc = Price of Condensed Milk/can; Pa = Price of Apples/unit Y = Average Per-Capita Income
The initial values of the variables are: Pp= $4/unit, Pc = $2.5; Pa = 5/unit and Y = $2000.
Using the information provided, what is the corresponding own-price arc elasticity of demand if the price of pumpkins rises to $5/unit? Is the calculated elasticity price elastic or inelastic? Based on your answer should the seller raise prices? Why or Why not?
If income (Y) increases to $2500 and with all other variables held at their initial values, what’s the corresponding income arc elasticity of demand? Why? Using your calculations, how much demand will decrease, if the income decreases by 10%? Why?
If Pa increases to $9/unit with all other variables held at their values, what is the corresponding cross-price elasticity demand?
Are Pumpkins an inferior or normal good? Why? Explain your answer based on income elasticities? Are Pumpkins and Apples substitutes or complements? Why? Explain your answer based on cross-price elasticities.