Question Details

Given that Q D = 1000 12P+20PX 50PZ + 0.2Y

Where P = 1000, PX = 120,PZ = 15, Y = 10,000
(a)

Price Elasticity of demand for laser printers

Q D = 1000 12P+20PX 50PZ + 0.2Y
Now, solving the equation with respect to price
Q D = 1000 12P+20PX 50PZ + 0.2Y
On Substitution,
Q D = 1000 12P+20PX 50PZ + 0.2Y
Q D = 1000 12P+20(120) 50(15) + 0.2(10000)
Q D = 6150 12P
Now, calculating the demand at certain prices:
Price Quantity
$250
3150
$200
3750
$150
4350
$100
4950
$50
5550

Total Revenue
787500
750000
652500
495000
277500
Q 2 Q1 P1

P2 P1 Q1
3750 3150 200

=
= -0.95
200 250 3750

Therefore, Elasticity at $250 =

Price Quantity
$250
3150
$200
3750
$150
4350
$100
4950
$50
5550

(b)

Total Revenue
787500
750000
652500
495000
277500

Elasticity

Description

-0.95
-0.64
-0.41
-0.24

Inelastic
Inelastic
Inelastic
Inelastic

Q D = 1000 12P+20PX 50PZ + 0.2Y

Where P = 1000,PZ = 15, Y = 10,000
Cross Price elasticity with respect to Commodity x is
Q D = 1000 12P+20PX 50PZ + 0.2Y
Q D = 1000 12(200)+20PX 50(15) + 0.2(10000)
Q D = 1000 2400+20PX 750 + 2000
Q D = 20PX 150

Now, calculating the demand at certain prices:

Price Quantity
$250
4850
$200
3850
$150
2850
$100
1850
$50
850

Total Revenue
1212500
770000
427500
185000
42500

Therefore, Elasticity at $250 =

=
Price Quantity
$250
4850
$200
3850
$150
2850
$100
1850
$50
850

3850 4850 250

200 250 4850

Total Revenue
1212500
770000
427500
185000
42500

Elasticity

Description

1.03
1.04
1.05
1.08

Elastic
Elastic
Elastic
Elastic

Considering and Example, Commodity X can be a television brand say Samsung

in comparison with videocon. Yes! The commodity x is a substitute as the price
increasing, the quantity demanded also increasing

(c)

Q D = 1000 12P+20PX 50PZ + 0.2Y

Where P = 1000, PX = 120, Y = 10,000
Cross Price elasticity with respect to Commodity z is
Q D = 1000 12P+20PX 50PZ + 0.2Y
Q D = 1000 12(1000)+20(102) 50PZ + 0.2(10000)
Q D = 6960 50PZ

Now, calculating the demand at certain prices:

Price Quantity
$250
5540
$200
3040
$150
540
$100
-1960
$50
-4460

Total Revenue
$1,385,000
$608,000
$81,000
$196,000
$223,000

Therefore, Elasticity at $250 =

Price Quantity
$250
5540
$200
3040
$150
540
$100
-1960
$50
-4460

3040 5540 250

200 250 5540

Total Revenue

Elasticity

Description

$1,385,000
$608,000
$81,000
$196,000
$223,000

2.26
3.29
13.89
2.55

Elastic
Elastic
Elastic
Elastic

Yes! The commodity x is a substitute as the price is increasing, the quantity

demanded also increasing

(d)

Given that Q D = 1000 12P+20PX 50PZ + 0.2Y

Where P = 1000, PX = 120,PZ = 15, Y = 10,000
Income Elasticity of demand for laser printers
Q D = 1000 12P+20PX 50PZ + 0.2Y
Q D = 1000 12(1000)+20(120) 50(15) + 0.2Y
Q D = 1000 12000+2400 750 + 0.2Y
Q D = 9300 + 0.2Y
Now, calculating the demand at certain prices
Price Quantity
$250
-9250
$200
-9260
$150
-9270
$100
-9280
$50
-9290

Total Revenue
($2,312,500)
($1,852,000)
($1,390,500)
($928,000)
($464,500)

Therefore, Elasticity at $250 =

Price Quantity
$250
-9250
$200
-9260
$150
-9270
$100
-9280
$50
-9290

3040 5540 250

200 250 5540

Total Revenue

Elasticity

Description

($2,312,500)
($1,852,000)
($1,390,500)
($928,000)
($464,500)

-0.005405405
-0.004319654
-0.003236246
-0.002155172

Inelastic
Inelastic
Inelastic
Inelastic

Printers are normal goods as an inferior good is a good that decreases in demand
when consumer income rises, unlike normal goods for which the opposite is observed.