THE DEMAND FUNCTION FOR A PRODUCT Y IS GIVEN BY: Y = PY-1.9PZ-1.4m1.2 for Py = T

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THE DEMAND FUNCTION FOR A PRODUCT Y IS GIVEN BY: Y = PY-1.9PZ-1.4m1.2 for Py = THE PRICE OF PRODUCT Y, PZ = THE PRICE OF RELATED GOOD Z AND m = INCOME. a) DERIVE OR IDENTIFY THE OWN PRICE ELASTCITY, THE CROSS-PRICE ELASTICITY, AND THE INCOME ELASTICITY. b) TELL US RELATIONSHIP BETWEEN PRODUCT Y AND PRODUCT Z IN THE CASE OF THIS DEMAND ANALYSIS? ARE PRODUCT Y AND PRODUCE Z SUBSTITUTE GOODS OR COMPLEMENT GOODS? EXPLAIN USING THE ELASTICITIES YOU IDENTIFIED. c) IS THE DEMAND FOR PRODUCT Y RELATIVELY ELASTIC, RELATIVELY INELASTIC, OR UNITARY ELASTIC? WHY? d) IS THE PRODUCT Y A NORMAL GOOD, AN INFERIOR GOOD, OR A LUXURY GOOD? TELL US A BIT ABOUT PRODUCT Y. e) SUPPOSE YOU PRODUCE AND SELL PRODUCT Y, BUT ANOTHER COMPANY PRODUCES AND SELLS PRODUCT Z. THE COMPANY THAT PRODUCES AND SELLS PRODUCT Z LOWERS THE PRICE ON Z BY 10%. WHAT WILL THIS PRICE DECREASE ON PRODUCT Z DO TO YOUR SALES OF PRODUCT Y? EXPLAIN. MIGHT IT BE ADVANTAGEOUS TO LOOK INTO BUYING OUT, OR BUYING INTO, THE COMPANY THAT PRODUCES Z GIVEN THESE ESTIMATED DEMAND CONDITIONS? WHY OR WHY NOT? EXPLAIN. f) NOW SUPPOSE THAT YOU PRODUCE AND SELL BOTH PRODUCTS. WHAT WOULD BE YOUR STRATEGY TO INCREASE SALES AND ALSO INCREASE REVENUES GIVEN THE DEMAND FUNCTION AND THE ELASTICITIES THAT YOU IDENTIFIED? g) SUPPOSE YOU NOW OWN BOTH THE Y-PRODUCING/SALES AND THE Z-PRODUCING/SALES COMPANIES AND ANOTHER DEEP RECESSION SETS IN BOTH YOUR COUNTRY AND IN OTHER NATIONS WHERE YOU MIGHT BE ENGAGED IN EXPORTING ACTIVITIES WITH PRODUCTS Y AND Z. THIS RECESSION IS NOW CAUSING A DECREASE IN INCOME LEVELS AROUND THE WORLD OF 20%. WHAT ARE THE IMPACTS OF THIS MESS ON YOUR SALES, REVENUES, AND EXPORTING? EXPLAIN. WHAT DO YOU DO NOW? GO TO GRANDMA'S HOUSE, PUNT,BAIL OUT, PAY OFF YOUR LOANS? WHAT?

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www.managementstudyguide.com/consumer-demand.html

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