Economic in calculation Questions Inquiry!

DreamBell
Qd = 3500-40P + 17.5Px + 670U + 0...9.A + 6500N

P=monthly rental price of XY machine
Px= monthly rental price of old town XY machine (Largest competitor)
U = current unemployment rate in the 10 largest metropolitan areas.
A=Advertising expenditures for XY machine
N=fraction of the Singapore population btw ages 10 to 30

Question
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1. What is the point price elasticity of demand for XY when P=$150, Px=$100, U=0.12, A=\$200000 and N=0.35.

2. what is the point cross e;asticity of demand with respect to XY machine for values of the independent variables given in part 1.

Answers and Replies

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talk2glenn
1. Price elasticity of demand is defined as the change in demand for good xy in response to a change in price for the good, and can be found by taking dQD/dP * P/Q. In your case, Qd'(P) = 40, easily enough. So Ep(xy) = 40 * P/Qd(xy). This function can be easily solved at the point P = 150 using the values given by the problem.

2. Cross price elasticity of demand is defined as the change in demand for good xy in response to a change in price for another good, say x. This is found the exact same way, except you are taking the derivative with respect to Px instead of P. It's another very easy derivative; Qd'(Px) = 17.5. So Ecp(xy) = 17.5 * Px/Qd(xy).

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DreamBell
Hi there,
Thanks a lot for the helping ....
i was just cracking head to find some one to teach me in Eco Cal question.
Maybe dont have any basic in Eco ....

May i know why Qd'(P) = 40 ?
How u calculate and get the 40 ?

DreamBell
well ..... can i said so :

Qd = 3500-40(150)+17.5(100)+670(0.12)+0.0090(200000)+6500(0.35)
= 3405.4

1. 40 * (150/3405.4) = 1.7619

2. 17.5 * (100/3405.4) = 0.519

Pls correct me if i'm wrong .......
Thanks a lot 1st ya ~

regards,
DreamBell

talk2glenn
Hi there,
Thanks a lot for the helping ....
i was just cracking head to find some one to teach me in Eco Cal question.
Maybe dont have any basic in Eco ....

May i know why Qd'(P) = 40 ?
How u calculate and get the 40 ?
Have you not taken any calculus? It's the derivative of a function with 1 variable (called the power rule, iirc). The formula for d(x) is A*B*x^B-1 given the formula Ax^B.

You'll need at least an introduction to calculus before you do econometrics.

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DreamBell
Well , i think i need some time to pick up in Econ subject .....
But really hoe can get more helps here so that i'm able to cope with subject Econ .....
Thanks a lot ~

Evo
Mentor
Please post this in the approproiate Homework Help forum.