The demand functions for two commodities, A and B, are given by QA=AP-0.5Y0.5 and QB=BP-1.5Y1.5 (a)...

The demand functions for two commodities, A and B, are given by Q_A=AP^-0.5Y^0.5 and Q_B=BP^-1.5Y^1.5

(a) Find the price elasticity of demand for each good and hence comment on the relative sensitivity of demand due to changes in price.

(b) Find the income elasticity of demand for each good. Which good is normal and which is superior? Give a reason for your answer.

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Rahul Sunny answered 1 year ago

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