Econ 226
Practice 1 key
1. The demand for good X has been estimated as
QX = 6 - 2PX + 5PY + 3I
Suppose that X sells for $3 per unit and Y sells for $2 per unit. Let consumer income be 10.
QX =40
a. Calculate the own price elasticity.
EQxPx =-2(3/40)=-0.15
Econ 226
Ch 5-6-7 Suggested Key
1. All else equal, an incumbent would prefer blockaded entry to deterable entry. Comment.
Entry is blockaded if the incumbent need not undertake any entry-deterring strategies to deter
entry. Blockaded entry may result when
Econ 226
Ch 5-6-7
1. All else equal, an incumbent would prefer blockaded entry to deterable entry. Comment.
2. Consider a firm selling two products, A and B, that substitute for each other. Suppose that
an entrant introduces a product that is identical to
Econ 226
Practice 1
1. The demand for good X has been estimated as
QX = 6 - 2PX + 5PY + 3I
Suppose that X sells for $3 per unit and Y sells for $2 per unit. Let consumer income be 10.
a. Calculate the own price elasticity.
b. Interpret the elasticity from