The equation of an estimated demand function is as follows: – QdA (Quantity demand for A) = 200.5 – 2.5 Pa – 1.5Pb + 3.5 I where, Pa = Price of A Pb = Price of B [It is a related product] I = Income (i) Determine the demand when Pa = $ 500, Pb = $ 100 and I = $ 3000 (ii) Estimate the price elasticity, cross-price elasticity and income elasticity of the demand according to point method. (iii) Estimate the elasticity of the demand according to proportion method if Pa2 = $ 515, Pb2 = $ 105 and I = $ 3500.

/in /by

The equation of an estimated demand function is as follows: –

QdA (Quantity demand for A) = 200.5 – 2.5 Pa – 1.5Pb + 3.5 I

where, Pa = Price of A

Pb = Price of B [It is a related product]

I = Income

(i) Determine the demand when Pa = $ 500, Pb = $ 100 and I = $ 3000

(ii) Estimate the price elasticity, cross-price elasticity and income
elasticity of the demand according to point method.

(iii) Estimate the elasticity of the demand according to proportion
method if Pa2 = $ 515, Pb2 = $ 105 and I = $ 3500.

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