Suppose the demand function for good X is given by Q^d_X = 10 - 1.8P_x + 0.5P_y + 0.07M + 0.01A where P_x is price of good X, P_Y is price of good Y, M is average income of individuals consuming good X, and A is advertising expenditure. Currently, P_x = $5, P_y = $I2, M = $200 and A = $600. Based on this information, which of the following is/are true? A 10% increase in the price of good Y will cause the quantity demanded of Good X to decrease by approximately 2.22% Demand for Good X is relatively inelastic Good X is a normal good I only II only I and III II and III I, II and III
Suppose the demand function for good X is given by Q^d_X = 10 - 1.8P_x + 0.5P_y + 0.07M + 0.01A where P_x is price of good X, P_Y is price of good Y, M is average income of individuals consuming good X, and A is advertising expenditure. Currently, P_x = $5, P_y = $I2, M = $200 and A = $600. Based on this information, which of the following is/are true? A 10% increase in the price of good Y will cause the quantity demanded of Good X to decrease by approximately 2.22% Demand for Good X is relatively inelastic Good X is a normal good I only II only I and III II and III I, II and III
Chapter5: Income And Substitution Effects
Section: Chapter Questions
Problem 5.12P
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