Question number 2.7 and 2.8
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Given in the question-
Price of the Brand " x" (Px) = $2
Price of the Brand "y" (Py) = $4
Price of the Brand "z" (Pz) = $4
Per capita income (M) = $20,000
Equation for market demand for Brand "x"
Solution - To answer this question we are going to consider "2" cases
1. When "M" will incerase
2.When "M" will decrease
From the equation "1" we can see that cofficient of "M" is negative So,
When "M" will increase
when "M" increase overall demand of brand "x" will decrease
when "M" decrease overall demand of brand "x" will increase .
Both cases suggest that Brand "x" is inferior good
Now , comparing result of above cases with definition of "inferior good".
"Those goods whose demand wiil go down with increase in income and demand will go up with decrease in income are called inferior good"
After camparing we can say that Brand "x" is inferior good.
Solution - From the equation "1" we can see that
The cofficients of "Px" and "Py" both are negative
So, with increase in price of Brand "Y" negatively affect the demand of Brand "x"
And With decrease in price of Brand "Y" positively affect the demand of Brand "x"
This means that Brand "x" and Brand "y" are complement goods
Now, Comparing above cases with defini...
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