1. Business
  2. Economics
  3. 2 klein pp197 assume that country x has no domestic...

Question: 2 klein pp197 assume that country x has no domestic...

Question details

2. (Klein pp.197) Assume that Country X has no domestic production of widgets. Its demand for widgets, therefore, is based exclusively on imports. Consider the import demand functiorn 2m- 20- where Pm is the price of imports. a) At what quantity does this import demand curve exhibit unit elasticity, that is, dom 1? If Qm - 8, is import demand elastic or inelastic? What if the quantity demanded rises to 11? (b) Now assume that the import demand function is written as log-linear specification In(Q-20-1 In(P). What is the elasticity of this function and how would you characterize it: elastic, inelastic, or unit elastic? What happens to the elasticity if the quantity demanded changes?

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution