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Assume that demand curve for a product is given by:

Q(d/x) = 1200 – 3Px – 0.1Pz

Where Pz = $300

(a) What is the own price elasticity of demand when PX = $140? Use the point elasticity formula. Please show all calculations. 

(b) Is this a necessary or a luxury good? Please explain.

(c) What will happen to the firm’s revenue if it decided to charge a price below $140? Please explain and show all calculations.

(d) What is the cross price elasticity between Good X and Good Z when PX = $140 and

PZ= $300? Are goods X and Z substitutes or complements? Please explain and show all calculations.

KM
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