Answer : By putting all given values in Qx we get,
Qx = 22000 - (2.5 * 450) + (4 * 40) - (1 * 20000) + (1.5 * 3000)
=> Qx = 22000 - 1125 + 160 - 20000 + 4500
=> Qx = 5535
a) Own price elasticity of demand (Ed) = ( Qx / Px) * (Px / Qx)
=> Ed = - 2.5 * (450 / 5535)
=> Ed = - 0.203
Therefore, the own price elasticity of demand is - 0.203 .
b) As here Ed = - 0.203 < 1, hence the demand is inelastic.
c) Now, if Py = $50 then,
Qx = 22000 - (2.5 * 450) + (4 * 50) - (1 * 20000) + (1.5 * 3000)
=> Qx = 22000 - 1125 + 200 - 20000 + 4500
=> Qx = 5575
Now,
Ed = - 2.5 * (450 / 5575)
=> Ed = - 0.202
Therefore, here the own price elasticity of demand is - 0.202.
As here Ed = - 0.202 < 1, hence the demand is inelastic.
Thus, the answer of (a) changes when Py is $50 where the answer of (b) remains unchanged.
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