# Consider the estimated demand equation of Qx=1000-3.3Px-0.2Pz+0.001Y Where Y is income, z is… 1 answer below »

Consider the estimated demand equation of
Qx=1000-3.3Px-0.2Pz+0.001Y
Where Y is income, z is another good, and P denotes the price.
a. What is the demand equation as a function of Px if the price of good z is \$100, the
income in thousands is \$25? Calculate the price elasticity for a \$1 change in price
at initial price level 0. Calculate the income elasticity for a \$1 change in
income at initial income (\$25k).
b. What is the change in demand if price rises by \$1, holding other factors constant?
What is the percentage change in demand if price rises by \$1 from an initial price
of Px=0 given Y=000 and Pz=\$100? What is the effect on demand of \$1
increase in income, holding other factors constant? What is the percentage change
in demand if income rises by \$1 from an initial income of Y=\$25000 given
Px=\$200 and Pz=\$100?
c. Is good z a substitute or a complement? Can we say confidently whether good X
is a normal good or an inferior good?
d. Suppose Dg is a dummy variable for gender (Dg=1 for female) and De is a dummy
variable for employment status (De=1 for employed people) in the following

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Consider the estimated demand equation of Qx=1000-3.3Px-0.2Pz+0.001Y Where Y is income, z is… 1 answer below »
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Qx=1000-3.3Px-0.2Pz+0.001Y-100Dg+50De