Discussion Board 2
Ashley DeCleene
Business 620
The demand function for Good X is defined as Qx = 75 - 2Px - 1.5Py, where Py is the price
of Good Y. Calculate the price elasticity of demand using the point formula for Px = 20 and
Py = 10. Determine whether demand is elastic, inelastic, or unit elastic with respect to its
own price and whether Good Y is a substitute or a complement with respect to Good X.
Qx = 75 - 2Px - 1.5Py
Sub in Px = 20 and Py = 10:
Qx = 75-2 (20) – 1.5 (10)=75-40-15 = 20
Let Px increase by 15%= 23
Qx= 75-46-15= 14
-6/20 x 100% = -30%
PED = -30/15 = -2
Since PED < -1, demand is price elastic.
Let Py increase by 50% = 15
When Py increase, Qx= 75 - 2(20) - 1.5(15) = 12.5
%change in Qx =- (20-12.5)/20 x 100% = -37.5%
Finding XED = (-37.5/12.5) / (50/15) = -0.9
Since XED is negative, Good Y is a complementary good.
How important is saving for a household and the economy? How much should be saved?
It is essential for a household to save money. In fact, saving should be a priority for a
household. As a rule of thumb, saving 3 months worth of bills can help with a catastrophe may it
strike. Savings provide a source of household wealth and a buffer against uncertain time. By
saving money for a household and an economy the future of the entire economy becomes
brighter. Today, the economy is still suffering, no longer is an official recession, but suffering.
People tend to live beyond their means. By doing so, the people create great debts, which hurt
them as well as the nation’s economy. In fact, 43% of American families spend more than they
actually earn (Reybern, 2010, p.1). By engaging in such poor spending, Americans are unable to
save money. Proverbs 21:5 states, “The plans of the diligent lead to profit as surely as haste
leads to poverty.” If one applies this verse to their life, then it can be inferred that in order to
save money and boost the economy one must be diligent, careful and thorough. By saving
something, a future is being built. Some months are tighter than others, but by simply putting
back $10, and not buying two cups of premium coffee in that week, $40 is saved that month,
which can translate into larger numbers.
Savings are essential because of certain factors, which can be out of someone’s control.
These factors include unemployment and sickness. By saving enough to cover at least three
months of living expenses, a person can keep from the stress that unemployment and sickness
bring. This money will help make the household feel secure. Budgeting money every month
and not spending money on frivolous things can help with saving this money.
Resources
Reybern, S. (27 May 2010). Personal bankruptcy in America. BillShrink.com. Retrieved from
http://www.billshrink.com/blog8839/personal-bankruptcy-in-america/.
The Holy Bible, NIV.
