Question

2. using Calculus Method
Suppose the demand function for Reliance Jio recharge is given by.
DR = 200- 0.8 PR + 1.2 M + 2 PA
where PR = price of reliance jio recharge. M=income of buyer,
PA= price of airtel recharge
If PR = 199 , M = 2500, PA - 249 ,
Calculate price, income and cross price elasticity of jio recharge and comment on the nature of the service.​

Answer 1

Explanation:

The general linear demand for good X is estimated to be Qo=250,000-500P-1.50M-240PR, where P is

the price of good X, M is the average income of consumers who buy good X, and PR is the price of a

related good R. The values of P,M,and PR are expected to be $200, $60,000, and $100, respectively Use

these values at this point on demand to make the following calculations.

A. Calculate the price elasticity of demand (EDED). At this point on the demand for X, is the demand

elastic, inelastic, or unitary elastic?

B. Calculate the income elasticity of demand (EMEM). Is good X normal or inferior?

C. Calculate the cross-price elasticity (EXREXR). Are the goods X and R substitutes or complements?