Question

The demand for good X is given by

I

Odx = 3200 - 10PX - 24Py + 0.05M

Research shows that the prices of related goods are given by Py = $ 200 and the average income of

individuals consuming this product is M= $ 52,000.

a. Calculate price elasticity of demand at Px = $ 80. Is the demand price elastic or inelastic? Explain the

impact of a small price rise on total revenue.

b. How a small change in income may affect the demand of Good X? Is the good is inferior or normal? c. Calculate cross price elasticity with respect to Good Z. What do you think Good Z is compliment or substitute to Good X? How shall a small change in price of Good Z affects the demand of Good X.

d. illustrate the effect of the following events on the equilibrium price and quantity in construction

sector:

i. Labour rates have come down due to pandemic.

il. The home loan interest rates have substantially been reduced in order to boost demand​

Answer 1

Refer attachments

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