Suppose the own-price elasticity of demand for good X is - 3, its income elasticity is 1, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is - 4. Determine how much the consumption of this goodwill change if the price of good X decreases by 5 percent.

Consumption of good will increase by 15%

Explanation:

Price Elasticity of Demand : is demand responsiveness to price change.

Ped = Percentage change in demand / percentage change in price

Ped = %ΔQ / %ΔP

%ΔP = - 5; Pe = - 3 [Given]

As per formula:

-3 = %ΔQ / - 5

%ΔQ = (-3) X (-5) = + 15%

Percentage change (increase) in Quantity = 15%