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Calculate the elasticity of demand for good

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Reference no: EM13904691

The demand for Wanderlust Travel Services (X) is estimated to be:

QX = 22,000 - 2.5PX + 4PY - M + 1.5AX

where AX represents the amount of advertising spent on X, M is income per capita, and the other variables have their usual interpretations.

Suppose that the price of good X is $450, good Y sells for $40, the company utilizes 3000 units of advertising, and consumer income is $20,000.

a. Calculate the elasticity of demand for good X with respect to the price of X, the price of Y, income, and advertising.

c. Calculate consumer surplus at the profit-maximizing price if the marginal cost is $264.

Reference no: EM13904691

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