plz solve this microeconomic problem. I don\'t know though I tried to solve this
ID: 1215126 • Letter: P
Question
plz solve this microeconomic problem. I don't know though I tried to solve this problem all day..
The demand function for Coki-Cola is Q=a+bP+cP_m where O is quantity demanded of Coki-Cola, P is the price of Coki-Cola and P_m is the price of Mepsi-Cola. We found that the equilibrium quantity and price of Coki-Cola are 100 and $500, respectively and the equilibrium quantity and price of Mepsi-Cola are 200 and S400, respectively. Moreover, we also found that at the equilibrium, the own price elasticity (e_p) and the cross-price elasticity (_pm) of the demand of Coki-Cola are -2 and 1, respectively. Given the information, specify the demand function of Coca-Cola by calculating the values of a, b and c.Explanation / Answer
Q= a+ bP +cPm
price elasticity of Coki cola= (dQ/dP )*Q/P
= b*100/500 = -2 (given)
b= - 10
cross elasticity of Coki cola= (dQ/dPm )*Q/Pm = c*100/400 = 1
c= 4
now after using equilibrium values of Q, P ,Pm , b and c, we will find out a
100= a+ (-10)(500 )+4(400)
100 =a - 3400
a= 3500
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