Is the demand for Good X elastic? inelastic? or unit elastic? based on the following demand...
Is the demand for Good X elastic? inelastic? or unit elastic? based on the following demand function for Good X?
ln Qd = 40 - 0.75 ln Px +2.3 ln Py - 4.5 ln M where Px is the price of Good X, Py is the price of Good Y and M is consumer income.
Homework Answers
We know
elasticity is the degree of responsiveness of quantity demanded due to change in its own price, keeping other factor constant.
Elasticity=d(ln Qd)/d(ln Px)=-0.75
Thus elasticity=-0.75 which means demand is inelastic
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