Assume that the quantity demanded of a particular commodity is estimated to be
D=800p^(-(3)/(2))m^((2)/(3))
where
p
is the price and
m
is the mean income. a. What is the quantity demanded when
p=4
and
m=64
b. Find the price and the income elasticities of demand. Interpret your findings. c. Calculate both absolute and percentage changes in demand when only the price goes up by
1%
. (i.e. keep mean income constant)

Question

Assume that the quantity demanded of a particular commodity is estimated to be

D=800p^(-(3)/(2))m^((2)/(3))

where

p

is the price and

m

is the mean income. a. What is the quantity demanded when

p=4

and

m=64

b. Find the price and the income elasticities of demand. Interpret your findings. c. Calculate both absolute and percentage changes in demand when only the price goes up by

1%

. (i.e. keep mean income constant)

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