The demand for good X has been estimated to be lnQ_x^d = 100 - 2.5 lnP_X + 4 lnP_Y + lnM.The cross price elasticity of demand between goods X and Y is A)-2.5. B) 4.0. C)-2.5%. D)4.0%.

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand between goods X and Y can be calculated using the formula: % change in quantity demanded of X / % change in price of Y From the given demand equation, we can see that the coefficient of lnP_Y is 4. This means that a 1% change in the price of Y will lead to a 4% change in the quantity demanded of X. Therefore, the cross-price elasticity of demand between goods X and Y is 4.0.

The Demand for Good X Has Been Estimated to Be