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Econ Excel hw

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he cross price elasticity measured the degree of responsiveness of demand of a give commodity due to the change of price in substitute or complementary goods. In this case, ey,z = → where (δu/δpz) x δy/δu but u=Y, →. ey,z = [PZ-1.4/( PY-1.9PZ-1.4m1.2)] x [-1.4PZ-2.4( PY-1.9PZ-1.4m1.2)] → PZ-1.4 x -1.4Pz-2.4 therefore ey,z = -1.4Pz-3.8.On the other side income elasticity of demand is normally used to elucidate how the buyers’ income swings the demand factor for commodities. the equation will be differentiated in respect m therefore em= but u = Y → em = 1.2m1.4 (PY-1.9PZ-1.4)The product Y and Z are complementary goods. actually, positive cross price elasticity designates that two commodities are substitutes since the price of one commodity and demand of the other commodity positively vary. In the proviso that whenever the price of good Y upsurges, quantity of good Z also increases. On the other side a negative price elasticity of demand happens for complementary goods which do happen in the reverse direction. In this case inverse relationship between price and quantity demanded exist in the equation identified ey,z = -1.4Pz-3.8.Form a typical look on the demand function. Y = PY-1.9PZ-1.4m1.2 of product Y, it is clearly identified as a non- linear demand or curvilinear which changes all along the curve. It yields a demand curve instead of a demand line. Generally, it takes a form of power functions which graphically a rectangular hyperbola in shape. The powers of the price variable in a non-linear function indicate the coefficient of price elasticity of demand, which is normally constant. And the equation shows that consumers expenditure Y will increase with the price py-1.9 if its demand is relatively inelastic.This indicates that the income elasticity of product Y’s demand is positive. This consequently, shows an increase in consumer’s income leads s /he to purchase more of good Y. In this respect good