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Duffy-Deno (2003) estimated that the demand function for broadband service was Qs = 15.6p−0.563 for small firms and Ql = 16.0p−0.296 for larger ones. These two demand functions cross. What can you say about the elasticities of demand on the two demand curves at the point where they cross? What can you say about the elasticities of demand more generally (at other prices)? (Hint: The question about the crossing point may be a red herring. Explain why.)

Respuesta :

batolisis

Answer:

  • At point of intersection ; p = $0.90
  • The elasticities of the demand functions remain the same because they are independent functions during the entire demand curve

Explanation:

First we Determine the elasticity of demand for both Large firm and smaller firms

For Larger firms

∈1 = -0.296

For smaller firms

∈s = -0.563

At the point of crossing Determine the price at the point of crossing of the demand curves

Qs = Ql

the price at intersection ( P ) = $0.90

what can be said about the elasticities of demand is that the elasticities of the demand functions remain the same because they are independent during the entire  demand curve

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