Suppose the demand function for a firm’s product is given by lnQxd =7−1.5lnPx +2lnPy −0.5lnM+lnA
Quantity
95

where
Px = $15,
Py = $6,
M = $40,000, and A = $350
(LO1, LO5)
a. Determine the own price elasticity of demand, and state whether demand is elastic,
inelastic, or unitary elastic.
b. Determine the cross-price elasticity of demand between good X and good Y, and
state whether these two goods are substitutes or complements.
c. Determine the income elasticity of demand, and state whether good X is a normal or
inferior good.
d. Determine the own advertising elasticity of demand.