What is the own price elasticity of demand when Px = $154? Is the demand elastic or inelastic? What would happen to the firm’s revenue if it decided to charge a price below $154?

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The
demand curve for a product is given by Q^d_x = 1,000 – 2P_x
+.02P_zwhere P_z = $400. (Hint: If you’re not comfortable with the calculus
alternatives, compute Q at the given prices, then again with a 1% increase in
price. Then figure percentage change in Q over the percentage change in P,
%?Q/%?P).

a.
What
is the own price elasticity of demand when P_x = $154? Is the demand elastic or inelastic? What would happen to the firm’s revenue if it
decided to charge a price below $154?

b.
What
is the own price elasticity of demand when P_x = $354? Is the demand elastic or inelastic? What would happen to the firm’s revenue if it
decided to charge a price below $354?

c.
What
is the cross-price elasticity of demand between good X and good Z when P_x
= $154? Are good X and good Z
substitutes are complements?