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P M = $20000 P G = $1.00 I = $15000 A = $10000 This function is: Q T = 200 -.01P T +.005P M -10P G +.01I +.003A 4.
PM = $20000 PG = $1.00 I = $15000 A = $10000
This function is:
QT = 200 -.01PT +.005PM -10PG +.01I +.003A
4. Assume the PT = $17500 (which should make QT = 295). Now, using the point elasticity formula below, calculate the point price elasticity of demand. Is this point elasticity coefficient the same as the arc coefficient in #1? Why does this make sense if the two are the same? If the two differ, does this make sense and why? The formula is:
5. Calculate the point gasoline cross-price elasticity of demand with PG = $1.00. Use QT corresponding to PT = $20000. Other variables and their values are given at the top, before question #1. Does this elasticity indicate that the demand for Toyotas is relatively responsive to changes in the price of gasoline (PG)? Explain why or why not. The formula is:
6. Competition might be a worry for Toyota. Mazdas are represented by PM . Calculate the point Mazda cross-price elasticity of demand with PM = $20000 and PT = $20000. Does this elasticity coefficient indicate that the demand for Toyotas is relatively responsive to changes in the price of Mazdas? Explain why or why not. The formula is:
