First Problem The demand for kitty litter, in pounds, is: ln (D(p)) = 1, 000 p +

Question

First Problem The demand for kitty litter, in pounds, is: ln (D(p)) = 1, 000 p + ln(m) where p is the price of kitty litter and m is income. 1. What is the price elasticity of demand for kitty litter when p = 2 and m = 500? When p = 3 and m = 500? When p = 4 and m = 1, 500? 2. What is the income elasticity of demand for kitty litter when p = 2 and m = 500? When p = 2 and m = 1, 000? When p = 3 and m = 1, 500? 3. What is the price elasticity of demand when price is p and income is m? The income elasticity of demand?

Explanation / Answer

1. (D(p)) = 1, 000 p + ln(m)

Elasticity of demand= dQ/Q/(dP/P)

dQ/dP=-1,

dQ/dM=1/m

Elasticityof demand= (dQ/dP)*(P/Q)

Income elasticity= dQ/Q/(dM/M)=1/Q

P             m            Q            Elasof demandticity         income elasticity

2             500        1004.214608      -0.001991606     0.000995803

3             500        1003.214608      -0.002990387     0.000996796

4             1500      1003.31322         -0.003986791     0.000996698

2             1000      1004.907755      -0.001990232     0.000995116

3             1500      1004.31322         -0.002987116     0.000995705

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