Question: The statistics department of an appliance manufacturer has estimated that the demand function for their brand (brand X) automatic washer (number purchased annually) is as follows:

Q_x = 197,000 -100P_x+ 50P_y + 0.1Y+ 0.02A + 10,000P_L

P_x = the price of the company's washer

Py = the price of a major competitor's washer

Y = the average household income

A = the annual dollars spent on advertising

P_L= the cost of doing one load of wash in a self-service laundry.

(a) If P_y = $300, Y = $10,000, A = $200,000, and P_L = $0.30, find the price elasticity of demand between P_x = $350 and P_x = $400. (When P_x = $400, with the values of the other variables as given above, Q­x = 180,000.)

(b) Is e_p elastic, inelastic, or unitary elastic? Why? If you decrease price, does total revenue increase, decrease, or not change?

(c) Find the income elasticity of demand for Q_x, given P_x = $400, and the other variables are as given in part (a). Interpret your answer, i.e., what does it say, if anything, about the demand for brand X washers?