Suppose the own price elasticity of demand for a 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

a. The price of good X decreases by 5 percent.

Price elasticity of demand (PED) = percentage change in quantity / percentage change in price

But PED = -3

percentage change in price = -5%

hence

-3 = %change in quantity / -5%

%change in quantity = -3 * -5% = 15%

If price decreases by 5%, Consumption of good X will increase by 15%.

b. The price of good Y increases by 10 percent.

Cross Price Elasticity of Demand (XED) = %Change in Quantity Demanded of Good x / %Change in Price of Good Y

But XED = -4

%Change in Price of Good Y = 10%

Hence,

-4 = %Change in Quantity Demanded of Good x / 10%

%Change in Quantity Demanded of Good X = -4 * 10% = -40%

Good X and good Y are complements because XED is negative. Hence, if the price of good Y increases by 10%, consumption of good X reduces by 40%.

c. Advertising decreases by 3 percent.

Advertising elasticity of demand (AED) = the percentage change in the quantity demanded / the percentage change in advertising expenditures

But

AED = 2

the percentage change in advertising expenditures = - 3%

2 = the percentage change in advertising expenditures / -3%

the percentage change in advertising expenditures = 2 * -3% = -6%

when advertising expenditure reduces by 3%, the consumption of good X decreases by 6%.

d. Income increases by 4 percent.

Income elasticity of demand (YED) = %change in demand / %change in income

But

YED = 1

%change in income = 4%

1 = %change in demand / 4%

%change in demand = 1 * 4% = 4%

If income increases by 4%, the consumption of good X increases by 4%.