Asha
BIN ROBL
Tou
1630040
1535523
4 Aanes Payab
QUESTION 1 (50 Marks)
The research has found that the demand for Xewara Sdn. Bhd., a Cafe and Cake shop in
Damansara Hill area has been on the rise. The demand function is extimated to be
$Q = 6000 - 1/20P_x - 9P_y + 9P_z + 1/10I$
Where $P_x$ is the price of Xewara, $P_y$ is Starbuck Cafe (a competitor), $P_z$ is Coffee Bean Café and $I$
is income and $A_x$ is the cost of advertising Xewara.
The research also found out that Xewara sells cake with coffee in a package at RM25, Starbuck
sells at RM35 for similar package, Coffee bean sells at $100, and the average income of
household consuming for this product in Damansara Hill is RM70,000 per annum.
Based upon the results of the research, please calculate the following questions:
I. What is the price elasticity of Xewara Café Sdn. Bhd.?
II. Is Good Y is substitute to Good X?
III. Is Good X is complementary to Good Z?
IV. What is the cross price elasticity?
V. What is the Income elasticity?
VI. How many cake and coffee in a package are sold?
VII. How many unit of good X will be purchased when $P_x = RM5,230$?
VIII. Determine the demand function good X with all other changes except the price
IX. Determine the inverse demand function for good X
X. Summarise the determinants of demand for good X