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[Step-by-Step] The demand for Wanderlust Travel services (X) is estimated to be Q_X=22,000-2.5P_x+4P_y-M+1.5A_x where A x represents the amount of advertising

Question: The demand for Wanderlust Travel services ( X ) is estimated to be

\[{{Q}_{X}}=22,000-2.5{{P}_{x}}+4{{P}_{y}}-M+1.5{{A}_{x}}\]

where A x represents the amount of advertising spent on X and the other variables have their usual interpretations. Suppose that the price of good X is $450, good Y sells for $40, the company utilizes 3,000 units of advertising, and consumer income is $20,000.

  1. Calculate the own price elasticity of demand at these values of prices, income, and advertising
  2. Is demand elastic, inelastic or unitary elastic?
  3. How will your answers will change if the price of Y increases to $50.

Price: $2.99
Solution: The downloadable solution consists of 2 pages
Deliverable: Word Document


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