Please answer ASAP. Thanks in advance 11. For statistically estimated demand function for thecommodity X,1547 P0.2 p0.3 A0.4yp0.5 B0.3(where x, y, z are goods, A stands for advertisementoutiay, B for budget of the consumer and P, P, P, areprices of goods x, y, z respectively).Answer the following :(a) How are x, y and z related ?

Related goods: Two goods can be either substitutes or complements. Substitute goods Two goods are…

For statistically estimated demand function for the commodity X, 1547 p0.2 p0.3 A0.4 p0.5 g0.3 D. X, `y. (where x, y, 2 are goods, A stands for advertisement outiay, B for budget of the consumer and P, P, P, are y'z prices of goods x, y, z respectively).

For statistically estimated demand function for the commodity X, 1547 p0.2 p0.3 A0.4 p0.5 g0.3 D. X, `y. (where x, y, 2 are goods, A stands for advertisement outiay, B for budget of the consumer and P, P, P, are y'z prices of goods x, y, z respectively).

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter6: Simple Pricing

Section: Chapter Questions

Problem 5MC

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Please answer ASAP. Thanks in advance

11. For statistically estimated demand function for the
commodity X,
1547 P0.2 p0.3 A0.4
y
p0.5 B0.3
(where x, y, z are goods, A stands for advertisement
outiay, B for budget of the consumer and P, P, P, are
prices of goods x, y, z respectively).
Answer the following :
(a) How are x, y and z related ?

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Suppose that a person regards ham and cheese as pure complements—he or she will always use one slice of ham in combination with one slice of cheese to make a ham and cheese sandwich. Suppose also that ham and cheese are the only goods that this person buys, and that bread is free.6.1. If the price of ham is equal to the price of cheese, show that the own-price elasticity of demand for ham is –0.5 and that the cross-price elasticity ofdemand for ham with respect to the price of cheese is also –0.5.6.2. Explain why the results from (6.1) reflect only income effects, not substitution effects. What are the compensated price elasticities in this problem?6.3. Use the results from (6.2) to show how your answers to (6.1) would change if a slice of ham cost twice the price of a slice of cheese.
When determining whether two goods are complements you would look for a cross-elasticity of demand.