Suppose the market demand function is as follows: Q=75-6Px + 2Py + 5M where Px is...

Suppose the market demand function is as follows: Q=75-6Px + 2Py + 5M where Px is the price of x, Py is the price of Y and M is income. Currently the price of Y is $75 and income M is $200.
Determine the following:
i) If the price is $150, what is the quantity demanded? Qd=
ii) What is the price elasticity of demand? (in absolute value)
iii) At this price, demand is elastic, inelastic or unitary?
iv) What is the income elasticity of demand?
v) Could this be a luxury good? (yes or no)
vi) Determine the price and quantity such that elasticity of demand equals (-1) unitary elasticity.
Price =
Quantity =

Expert Solution

Rahul Sunny answered 2 years ago

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