Answer to Question #212544 in Microeconomics for sue

Question

Assuming that the given demand function Qd = 700 − 2P − PR + 0.1M, represents the demand for Good-X where P is the price of Good-X, PR is the price of related product, while M is average consumer income.

a.​What happens to the demand for Good-X when the price of related product goes up? ​What are the Good-X and the related product?

b.​What happens to the demand for Good-X when average consumer income rises?

Answer 1

a) The demand for Good-X will increase. Good-X and related product are substitute goods.

b) The demand for Good-X will increase.