ECO404 Assignment Solution 2020

ECO404 Assignment Solution 2020

 

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1-TOTAL SALE
QD=580 – 0.25Pd + 0.43Y +0.91Pp + 0.75A
=580+  0.25 (45000) + 0.43(85000) + .91(43000)+ .75(22000)
=580+ 11250+36500+39130+16500
QD= 81460
2- Price elasticity of demand
PED= % change in QD /%change in Price
 To find %change in QD it require to do by partial derivation
Make derivation with respect to price
QD=580 – 0.25Pd + 0.43Y +0.91Pp + 0.75A
dQd/dPd = 0-0.25(1)+ 0+0+0
=-0.25 
Now put in main formula of PED
-.25 xPd/Qd    pd=45000 given   Qd = 81460 calculated
-0.25 x 45000/81460 
= -0.14 less elastic
3- Income elasticity of demand
YEd=  %change in QD /%change in Income
Again partial derviation for QD funcation with respect to income now .
Qd=580 – 0.25pd+ 0.43Y +0.91Pp+0.75A
dQd/dy = 0-0+0.43 +0+0
= 0.43
Yed= 0.43 x income/QD
0.43 x 85000 / 81460
0.49  less elastic 
4) cross elasticity of demand  =
%change in QD of good 1 /%change in price of good 2
Again Partial derivation of QD with respect of price of other good
Qd =580 -0.25pd +0.43Y + 0.91pp + 0.75A
dQd/dPp= 0-0+0+0.91 +0
=0.91
Cross Elasticity of demand =0.91 x Pp/Qd
=0.91 x 43000/ 81460
=0.48 less elastic
Advertising elasticity of demand
Qd= 580-0.25Pd+0.43Y+0.91Pp+0.75 A
dQd/dA= 0-0+0+0+0.75
=0.75 
Put in formula
0.75 xA/Qd
0.75 x 22000/81460
0.75 x 0.2700
0.20  less elastic