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uppose the demand curve for a product is given by
Q = 10 - 2P + Ps
where P is the price of the product and Ps is the price of a substitute good. The price of the substitute good is ​$2.00.
a. Suppose P = ​$1.00. The price elasticity of demand is_____. ​
b. Suppose the price of the good, P, goes to $2.00. Now what is the price elasticity of demand? What is the cross-price elasticity of demand?

Respuesta :

ogorwyne

Answer:

A. 0.2

B. 0.5, 0.25

Explanation:

Q = 10-2p+2

We take like terms

Q= 10+2-2p

= 12-2p

A. If p = 1 dollar

12-2(1)

Q = 10

Price elasticity would be change in quantity divided by the change in price = -2

-2 x p/q

= -2x1/10

= 0.2

Price elasticity of demand is 0.2

B. P = 2 dollars

Q= 10-2x2+2

= 10-4+2

= 8

Price elasticity

= -2x2/8

= 0.5

Cross elasticity

= 1x2/8

= 0.25

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