The demand curve for a product is given by QXd = 1,200 - 3PX - 0.1PZ where the Pz = $300.
1. Calculate the own price elasticity of demand when the Px = $140? Is demand inelastic or elastic at this price? What would happen to
the firm's revenue if it decided to charge a price below $140?
Instruction: Round your response to 2 decimal places.
Own price elasticity:
If the firm prices below $140, revenue will:
Demand is:
2. Determine the own price elasticity of demand when the Px = $240? Is demand elastic or inelastic at this price? Discuss what would happen to the firm's revenue if it decided to charge a price above $240?
Instruction: Round your response to 1 decimal place.
Demand is:
Own price elasticity:
If the firm prices above $240, revenue will:
3. Estimate the cross-price elasticity of demand among the good X and good Z when the Px = $140? Are goods X and Z substitutes or complements?
Instruction: Round your response to 2 decimal places.
Goods X and Z are:
Cross-price elasticity: