Problem
The demand function for a good is
= 56.6 - 0.25p - 0.03m + 0.45ps + 0.6n
where q is the quantity demanded per week, p is the price per unit, m is the average weekly income, ps is the price of a competing good and n is the population in millions. Given values are p = 65, m = 350, ps = 60 and n = 24.
(a) Calculate the price elasticity of demand.
(b) Find out what would happen to (a) if n rose to 26.
(c) Explain why this is an inferior good.
(d) If producers of the competing product and the manufacturer of this good both increased their prices by the same percentage, what would happen to the quantity demanded (of the original good), assuming that the proportional price change is small and relevant elasticity measures do not alter significantly.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.