Math Solutions

(Step-by-Step) Below is a mathematical demand function for new Cadillac’s sold per year for a dealer. Q_C=200-0.01P_C+0.005P_L-10P_G+0.01Y+0.003A where: P C

Question: Below is a mathematical demand function for new Cadillac’s sold per year for a dealer.

\[{{Q}_{C}}=200-0.01{{P}_{C}}+0.005{{P}_{L}}-10{{P}_{G}}+0.01Y+0.003A\]

where:

P C = the average price of Cadillac’s

P L = the average price of Lincoln Continentals

P G = the price of gasoline

Y = the average family income

A = dollars spent annually on advertising.

  1. Find the point price elasticity of demand if P C = $11,000, P L = $10,000, P G = $0.60
    Y= $6,000, and A = $2,000.
  2. Is the price elasticity of demand elastic, unitary elastic, or inelastic? Why?
  3. Find the arc cross elasticity of demand for Cadillac’s and Continentals between P L = $10,000 and P L = $9,000. [All other figures except Q, remain the same as part (a)
  4. Are Cadillac’s and Lincolns substitutes or complements? Why?

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


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