Suppose the demand for a product is Q_x^d = 12 − 3 ln P_x. Then demand for product x is: A) inelastic. B) unitary elastic. C) elastic. D) It cannot be determined without more information.

Question

Quizplus · Accepted Answer

The demand for product x can be considered elastic if the price elasticity of demand (PED) is greater than 1. It can be calculated by taking the percentage change in quantity demanded divided by the percentage change in price. However, since we do not have information on the specific values of P or Q, we cannot calculate PED exactly. But we do know that the demand equation includes a natural logarithm of P, which implies a decreasing marginal utility of income, suggesting the potential for elasticity. Additionally, the coefficient on the natural logarithm of P is negative, indicating an inverse relationship between P and Q. Therefore, we can conclude that the demand for product x is elastic.

Suppose the Demand for a Product Is Qxd = 12

Suppose the Demand for a Product Is Q_x^d = 12