The function can be said to be elastic in nature.
We have the function here given as : QXd = a + b ln PX + c ln M + e
Px = price of the commodity x
M is the income
a. The value of b is the price elasticity of demand. We have it that price is -2.18 as m is 55000 with the price of the good as 4.39.
Hence given that the absolute value of b is greater than 1, we can say that it is elastic in nature
Complete question
Question
The demand function for good X is In Qxd =a+b In Px +c In M+e, where Px is the price of good X and M is income . least square regression reveals that a^ =7.42, b^=-2.18, and c^=0.34,
a^ = 1.8 ,b^ = 1.18 , and c ^= 0.35.
a) if M = 55,000 and Px =4.39, compute the own price elasticity of demand based on these estimates , determine wheather demand is elastic or inelastic
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