Question

Qdx = 500 - 5Px + 0.5I + 10Py - 2Pz

1. based on the demand function above, what is the relationship between commodity x and commodity y

2. based on the demand function above, is commodity x a normal good or an inferior good. explain your answer

Answer 1

1. x and y are substitutes
2. x is normal good, because if income increases Qdx will increase