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Functions
The following demand function
is an exponential demand
function: 1
1
X C P
2
P Y2
Exponential Demand
Functions
This exponential
demand function
exhibits constant
elasticities:
X ,P x
1
X C P
2
1, e
X ,Py
1
X
PY
1
2
i1
qi
i1
1
2
Ii P X PY
1
2
1
2
Y
1
Q
2
1
1
I1 P X P
2
1
Q
2
le t
I1
I1
I2
I2
I3
1
2
Y
I3
I4 P
I4
1
X
1
2
Y
1
1
I3 P X P
2
1
X
16
th e n ,
1
Q cP
2
1
2
Y
1
1
I2 P X P
2
1
P * 2 3 * 1 * 1 1 1 .5
2
1
X
I4 P P
1
2
Y
1
2
Y
16
25
100 23
X , P
X , P
P X
c
2 P
P X
*
X
P
2
X
P
c
P
2 P
X , P
X , P
X , P
PY
X
*
PY
X
1
c
2
2 P X
PY
P
c
P
2 P
X , P
1
2
x ,I
X
I
*
I
X
If price of X doubles:
1
2
Y
1
1
X cP X P
2
1
X * 23 * 2
2
*1
1
2
5 .7 5
1
1
X cP X P
2
c 8 16
25
1
1
X * 2 1 .8 3 * 1 * 1
2
1 0 0 2 1 .8 3
1
2
1 0 .9 1
1
1
X cP X P
2
c 16 16
25
1
1
X * 2 0 .0 7 * 1 * 1
2
1
2
5 0 2 0 .0 7
1 0 .0 4
1
1
X cP X P
2
c 16 16
1
1
X * 23 *1 * 2
2
25
1
2
100 23
1 6 .2 6
If IP=IB=IA=IR=25:
1
2
Y
1
1
X
cP X P
2
c 4 25 20
1
X
* 20 * 1
2
* 1
1
2
10
1
1
X
cP X P
2
c 4 2 5 2 0
X
* 2 0 * 2
2
* 1
1
2
If IP or IR drops by 50%:
1
1
X
c P X 1 P Y2
2
c
1 2 .5
25
* 1 8 .5 4 * 1
2
1
X
cP
2
c
25
1
X
25
* 1
1
2
2 5 1 8 .5 4
9 .2 7
1
2
Y
25
1
X
* 1 8 .5 4 * 1
2
25
1
* 1
1
2
1 2 .5 1 8 .5 4
9 .2 7
I R PY
1 1
X c P X P
2
2 PX PZ
c IP IB IA 16 16 25 13
1
2
1
100 *1
1
X *13 *1 *1
5 6 .5
2
2*1*1
x ,P
PX
X
*
P X
X
c P
2 P
x ,P
x ,P
1
2
Y
2
X
I R PY
PX
2
1
2 P X PZ
c P Y2
I R PY
2 PX
2 PX PZ
x , PY
x , PY
x , PY
PY
X
*
PY
X
1
c P
2
2 P X
1
2
Y
I
2 P
c P Z 2 I R P
1
*
1
2
c P Z I R P Y2
1
2
Y
PY
R
Z
c P
2 P
1
2
Y
X
PY
2 P X P
R
X ,P
X ,P
X ,P
PZ
X
*
P Z
X
I R PY
2 *
2 P X P Z
P
c P
2 P
I R PY P
2 P X P Z2
c P
1
2
Y
1
2
Y
PZ I
2 P X PZ
I
2 P
R
X
c P
1
2
Y
, P
, P
c P
, P
I
I
1
2
Y
c P
P
1
2
Y
c P
1
2
Y