Consider the general demand function: Qd= 680-9P+0.006M-4Pr, where P is the price of the good, M is income, and Pr is the price of a related good, R. a) Interpret the slope parameters of the demand function b) is the good inferior? why? c) Is the good R a substitute for the good? why? d) derive the equation for the demand function when M= $15,000 and Pr=20 e) Using the equation derived in d, calculate the quantity demanded at price p= $30. Give an interpretation of this quantity
Consider the general demand function: Qd= 680-9P+0.006M-4Pr, where P is the price of the good, M is income, and Pr is the price of a related good, R. a) Interpret the slope parameters of the demand function b) is the good inferior? why? c) Is the good R a substitute for the good? why? d) derive the equation for the demand function when M= $15,000 and Pr=20 e) Using the equation derived in d, calculate the quantity demanded at price p= $30. Give an interpretation of this quantity
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The generalized demand and supply functions for good X are
Qd = 10 -2Px - 4PY + M Qs = 10 + 2PX
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Where: QD = quantity demanded of good X PX = price of good X M = consumer income PY = price of good Y |
QS = quantity supplied of good X PX = price of good X
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A. Are good X and good Y substitutes or complements? Why?
B. Is good X a normal good or an inferior good? Why?
C. What is the demand function when PY = $4 and M = $600?
d. Use the demand function you found in part c. and solve for the equilibrium price (Po) and the equilibrium quantity (Qo).
e. Find the inverse demand function and the inverse supply function.
f. Sketch this market.
