Suppose Qxd = 18,000 - 4 Px + 3 Py + 6M, where Px = $90,...

Suppose Q_x^d = 18,000 - 4 P_x + 3 P_y + 6M, where P_x = $90, P_y = $60, and M = $5,000.

(Note that Qdx is the quantity demanded of Good X, Px is the price of Good X, Py is the price of another product called Good Y, and M stands for income available.)

Use this information to answer the following five parts of this question. Please show detailed calculations.

a. For this demand equation, what is the P intercept?

b. For this demand equation, what is the Q intercept?

c. Is Good X normal good or an inferior good?

d. If M changes to $4000, how much does Qd of X change?

e. Are Good X and Good Y substitutes or complements? How do you know?

Solutions

Expert Solution

Rahul Sunny answered 2 months ago

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