Answer to Question #86264 in Microeconomics for rollet

Question

The demand function for product X is: Qd = 600 – 20Px + 0.02Y – 5Pr The supply function is: Qs = –300 + 10Px
Where:
Qd = the quantity of X demanded Qs = the quantity of X supplied Px = the price of product X Y = the average consumer income Pr = the price of the related product

Is product X a normal or an inferior good? Explain.
Are products X and R substitutes or complements? Explain.

Answer 1

X is a normal good as can be seen by the direct relationship between quantity demanded and income. An increase in income will result in an increase in demand.

X and R are complement goods since an increase in the demand of one will result in an increase of the other.