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Q. The empirical demand function of product X is estimated as:
x = 120 - 260.0P + 0.05M - 2.50PR
Where, x is the predicted quantity demanded of X, P is the price of X, M is the average consumer income, and is the price of a related product R.
a. Assume that the price of X is $1.65, the average consumer income is $20,000, and the price of the related good is $1.10. Compute the predicted quantity demanded of X at these prices and income.
b. At the values of P, M, PR given above, what are the price, income, and cross price elasticities of demand?
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