Suppose demand is given by Q xd = 50 − 4Px + 6Py + Ax,
where Px = $4, Py = $2, and Ax = $50.
(a) What is the quantity demanded of good x? Please show your calculations.
(b) What is the own price elasticity of demand (point elasticity) when PX = $4? Is demand elastic
or inelastic at this price? Please explain.
(c) What is the cross price elasticity of demand between good X and good Y when PX = $4 (point
elasticity) ? Are goods X and Y substitutes or complements? Please explain.
Sample Solution
