The demand curve for a product is given by QXd = 1,200 - 3PX - 0.1PZ where Pz = $300.
a. What is the own price elasticity of demand when Px = $140? Is demand elastic or inelastic at this price? What would happen to the firm�s revenue if it decided to charge a price below $140?
Own price elasticity:
If the firm prices below $140, revenue will: (increase, decrease or not change)
b. What is the own price elasticity of demand when Px = $240? Is demand elastic or inelastic at this price? What would happen to the firm�s revenue if it decided to charge a price above $240?
Own price elasticity:
If the firm prices above $240, revenue will:
c. What is the cross-price elasticity of demand between good X and good Z when Px = $140? Are goods X and Zsubstitutes or complements?
Cross-price elasticity: