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  3. of 2 30 points the demand of a product y...

Question: of 2 30 points the demand of a product y...

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of 2. (30 points) The demand of a product y depends on its own price UP ), and the price another product X (P. The price elasticity of Yis e,ー3.5, and the cross-price elasticity of Y with respect to X is e0.8. (a) Are X and Y substitutes or complements? lete (b) Suppose now P, increases by 2%, and r, decreases by 5%. Will the quantity demanded of Y increase or decrease? By what percent? 3. (20 points) The demand function of cigarettes is linear Q in packs, P is the price/pack in dollars (a) when P $2, what is the elasticity of demand 1,500-25oP where Q is quantity 2 Is the demand elastic or inelastic? (b) What is the price at which the demand for cigarettes has unitary elasticity? (c) Suppose after an anti- cigarettes campaign, the demand function of soft drinks becomes Q 5000-200P2 At the price you identified in (b), what is the elasticity of demand now given the new demand function? Is it elastic or inelastic?
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