7ow"5Demand for New Domestic Cars*QNA=-500PNA + 250Px + 125M -100,000,000R+20,000 Pop + 600AWhere Q'NA is quantity demanded of new domestic cars, PNA is the average price of newdomestic cars, Px is the average price of new import luxury cars, M is average annual householdincome, R is the average interest rate (in decimal format), Pop is the population (in millions),and A is the annual dollars spent on advertising on new cars (in millions).46a. What is the demand curve for new domestic cars if Px = $60,000, M = $56,000, R = 8percent = 0.08, Pop=300 million, and A = $5,000 million?Draw the demand curve for new domestic cars.b.c. According to the equation above, are new domestic cars and new import luxury carssubstitutes or complements? Explain.d. According to the equation above, are new domestic cars normal or inferior goods?Explain.e.f.Ceteris paribus, if the price of new import luxury cars increases to $62,000 whathappens to the demand curve for new domestic cars? Be as specific as possible.Ceteris paribus, if Px = $60,000 but the average annual household income falls to$50,000, what happens to the demand curve for new domestic cars? Be as specific aspossible.PlimbLtg. Find the inverse demand curve for new domestic cars when Px = $60,000, M = $56,000,R = 8 percent, Pop=300 million, and A = $5,000 million.h. What happens to the demand curve for new domestic cars if the average price of newdomestic cars increases from $30,000 to $35,000?i. Use the inverse demand curve to determine how much the price must change forconsumers to buy 1 million more domestic cars per year.4 = MX =(000)(0.08)ik +212,000

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Where Q'NA is quantity demanded of new domestic cars, PNA is the average price domestic cars, Px is the average price of new import luxury cars, M is average annual household ncome, R is the average interest rate (in decimal format), Pop is the population (in millions), and A is the annual dollars spent on advertising on new cars (in millions). a. What is the demand curve for new domestic cars if P, = $60,000, M = $56,000, R = 8 percent= 0.08, Pop =300 million, and A = $5,000 million? b. Draw the demand curve for new domestic cars. c. According to the equation above, are new domestic cars and new import luxury cars substitutes or complements? Explain.

Where Q'NA is quantity demanded of new domestic cars, PNA is the average price domestic cars, Px is the average price of new import luxury cars, M is average annual household ncome, R is the average interest rate (in decimal format), Pop is the population (in millions), and A is the annual dollars spent on advertising on new cars (in millions). a. What is the demand curve for new domestic cars if P, = $60,000, M = $56,000, R = 8 percent= 0.08, Pop =300 million, and A = $5,000 million? b. Draw the demand curve for new domestic cars. c. According to the equation above, are new domestic cars and new import luxury cars substitutes or complements? Explain.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 10PA

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