Given the demand function QX = 1500 – 100PX + 75PY + 1.5I + .06A where PY = $40.00, I = $2500, and A= $5,000. When price of good X is increased from $60.00 to $75.00, we know that demand for good Xover this range is:A) ElasticB) InelasticC) unitary elasticD) unresponsive to price changesE) none of the above

To answer this question, we need to calculate the price elasticity of demand for good X. The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.

The formula for price elasticity of demand (Ed) is:

Ed = (ΔQ / Q) / (ΔP / P)

Where:

• ΔQ is the change in quantity demanded
• Q is the initial quantity demanded
• ΔP is the change in price
• P is the initial price

First, we need to calculate the initial quantity demanded (Q1) when the price (P1) is $60.00. Substituting P1, PY, I, and A into the demand function:

Q1 = 1500 - 10060 + 7540 + 1.52500 + .065000 = 1500 - 6000 + 3000 + 3750 + 300 = 2550

Next, we calculate the new quantity demanded (Q2) when the price (P2) is $75.00:

Q2 = 1500 - 10075 + 7540 + 1.52500 + .065000 = 1500 - 7500 + 3000 + 3750 + 300 = 2050

Now we can calculate the percentage change in quantity demanded (ΔQ / Q) and the percentage change in price (ΔP / P):

ΔQ / Q = (Q2 - Q1) / Q1 = (2050 - 2550) / 2550 = -0.196 ΔP / P = (P2 - P1) / P1 = (75 - 60) / 60 = 0.25

Finally, we substitute these values into the formula for price elasticity of demand:

Ed = (ΔQ / Q) / (ΔP / P) = -0.196 / 0.25 = -0.784

The price elasticity of demand is less than 1 in absolute value, which means that the demand for good X is inelastic over this range. Therefore, the answer is B) Inelastic.