Consider a general demand function for a good, X, that has been estimated as: Q(d) = 200 - 8*Px...
Question:
Consider a general demand function for a good, X, that has been estimated as:
{eq}Q(d) = 200 - 8*Px + 2*Py + 0.4*M {/eq},
where Px is the price of the good being studied
Py is the price of a related good, Y and
M is per capita income.
a) Are X and Y complement, substitutes, or neither? How do you know?
b) Is X a normal good or an inferior good? How do you know?
c) Calculate the direct demand function, assuming that the price of Y is $6 and that per capita income is $38,000.
d) Calculate the inverse demand function, using your answer to c).
Law of demand
Law of demand states that if a consumer's demand for a good move in the same direction as the consumer's income, the consumer's demand for that good must be inversely related to the price of that good. Thus, the demand curve is linear and negatively sloped.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answer(a) The two goods X and Y are substitutes of each other. It is so because with the increase in the price of good Y, the demand for X will also...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
Normal & Inferior Goods in Microeconomics
from
Chapter 3 / Lesson 7
12K
Discover what a normal good is, know the definition of an inferior good and see examples of normal goods and inferior goods. Read about the demand curves for inferior goods and normal goods.
Related to this Question
- Consider the following demand equation: Q = 206 - 15 p - 10 p_0 + 0.18Y Here, p is the price of the good, p_0 is the price of a related good, and Y is income. If we assume the price of the related good is held fixed at $10 and that income is held fixed at
- Suppose the demand for X is given by Qxd = 100 + 2PX + 4PY + 10M + 2A, where PX represents the price of good X, PY is the price of good Y, M is income, and A is the amount of advertising on good X. Good X is: a. an inferior good. b. a normal good. c. a Gi
- The general linear demand for good X is estimated to be Q = 125,000 - 200P + 1.2M + 300PR Where P is the price of good X, M is the average income of consumers who buy good X and PR is the price of related good R. The current values of M and Pa are expect
- 1. Suppose you have the following hypothetical demand or sales function. Q X= 600- 6PX + 20I +0.4PY and PX = $80, (price of good X) PY =$1,300, (price of good Y) I = $30 (disposable per capita income)
- Assume the supply function for good X can be written as Qs = -100 + 27Px - 5Py - 1.8W, where Px = the price of X, Py = the price of good Y, and W = the wage index for workers in industry X. According to this equation: a. a decrease in wages would cause a
- Consider a utility function u(x1; x2) = x1^{1/2}x2^{1/2} . Let the prices of good 1 and good 2 be p1 and p2, and of course consumer's income is m. Find the demand functions.
- Suppose the demand function for Good X was given by QDx=78-5Px. Calculate the reservation price for the 63rd unit.
- The demand for product x is Q = 500 - 10Px + 0.5Py - .005M, where Px is the price of good x, Py is the price of another good, and M is the income of consumers. The current price of good x is $20, the current price of good y is $16, and the income level of
- Consider a consumer who purchases only two good x and good y. The consumer's utility function is U(x,y) = 4xy. Suppose prices are Px = $2 and Py = $4. She has an income of $20. a) Solve the optimal b
- The general demand function for good A is Qd = 754 + 2PA - 0.05M + 6 PB + 10 T + 3 PE + 2N where Qd = quantity demanded of good A each month, PA = price of good A, M = average household income, PB = price of related good B, T = a consumer taste index rang
- A firm's demand function for product X has the following questions: Qx = 1420 - 20Px - 10Py + 0.02M + 0.04A where Qx is the quantity purchased, Px is the price of X, Py is the price charged for a related good, M is per capita income, and A is the dollar
- The general demand function for good A is Qd = 754 - 2 PA - 0.05M + 6PB + 10\gamma+ 3PE + 2N where Qd = quantity demanded of good A each month, PA = price of good A, M = average household income, PB
- The demand for good X is given by: Q_X^d = 6,000 - P_X - P_Y + 9P_Z + \frac{1}{10}M Research shows that the prices of related goods are given by P_Y = $6,500 and P_Z = $100, while the average income of the individuals consuming this product is M = $70,0
- Suppose you have the following hypothetical demand or sales function: Qx = -4Px + 2Py + 0.20I + 0.04A, where PX = $200 (price of good X), PY =$230 (price of good Y), I = $1,500 (disposable per capita
- The demand for good X has been estimated by Qxd = 12 - 3Px + 4Py . Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the own price elas
- 1. Consider the utility function u x_1x_2 = x_1x_2. Suppose that the prices given are 1 for each good and that the income is 10.
- The demand for good X is estimated to be Qxd = 10,000 - 4P_X + 5P_Y+ 2M + A_X, where P_X is the price of good X, P_Y is the price of good Y, M is income, and A_X is the amount of advertising on X. Sup
- The demand function for Good X is given by Q_X^d = 7,500 - 0.5P_X - 0.5P_Y + 3P_Z + M, where P_X is the price of Good X, P_Y is the price of Good Y, P_Z is the price of Good Z, and M is the average in
- The demand for good x is Qx = 10,000 - 4Px + 5Py + 2M + A, where Px is the price of x, Py is the price of good y, M is income and A is the amount of advertising spent on x. Suppose the present price of good x is $50, Py = $100, M = $25,000, and A = $1,000
- Consider three consumers indexed by i ∈ {1, 2, 3) with the following demand functions for a public good G. p1 = 20 - (1/10) G, p2 = 20 - (1/10) G, p3 = 30 - (2/10) G Where pi is the price consumer i is willing to pay for a quantity of G. If marginal
- The demand equation for good X is given by Q_x^d = 6000 - 0.5P_x - P_y +P_z + 0.10M Research shows that the prices of related goods are Py = $6,500 and Pz = $100. The average income of purchasers is
- Consider the utility function u(x_1,x_2) = x_1 x_2. Suppose that the prices are given 1 for each good and the income is 10. Answer the questions.
- Annual market demand for good X has been estimated as: X=115-2.5Px-2.5N-1.5Py where X=quantity demanded of good X in units/year, Px=price of good X in dollars/unit, N=per capita income in thousands of
- Consider the utility function u(x_1,x_2) = x_1x_2. Suppose that the prices are given 1 for each good and the income is 10. Answer the questions.
- Assume you have an income of $100. The price of good X is $5, and the price of good Y is $20. a. Draw a correctly labeled budget line with "Quantity of good X" on the horizontal axis and "Quantity of
- The price of good A goes up. As a result, the demand for good B shifts to the left. From this, we can infer that: A) good A is a normal good B) good B is an inferior good C) goods A and B are substitutes D) goods A and B are complements
- Consider a scenario where the demand is estimated to be represented by the following equation: , Qx = 1000 - 10Px + 0.1I + 10Py Where Px is the price of X, I represents the income of the consumer, Py
- The demand for good X is given by the following equation: QX = 325 - PX - 1.5 PW + 1.25 PG + 0.8 PY - 0.1 M where QX is the number of X sold per week; PX, PW, PG, PY are the prices of the respective goods and M is the average monthly income. Currently P
- Suppose the demand for good A is given by Qa = 500-10Pa + 2Pb + 0.7Y where PA is the price of good A, Pb is the price of some other good b and Y is income. Assume that Pa is currently $10, Pb is currently $5 and Y is currently $100. i) What is the elasti
- Consider the utility function u( x_1, x_2 ) = x_1 x_2 .Suppose that the prices are given 1 for each good and the income is 10.
- Suppose that market demand for a good is given by Q = 10 - 0.4P while market supply is given by Q = 3 + 0.5P where Q is the quantity of the good in units, and P is the price of the good in $ per unit.
- Use the following general linear supply functions: Qs = 40 + 6P - 8Pi + 10 F Where Qs is the quantity supplied of the good, P is the price of the good, Pi is the price of an input, and F is the numbe
- The supply function for good X is given by Q_X^s = 1,000 + P_X - 5P_Y - 2P_W, where P_X is the price of X, P_Y is the price of good Y, and P_W is the price of input W. If the price of input W increases by $20, then the supply of good X: (a) will increase
- Suppose that the price of good X is $10, the price of good Y is $20, and our income is $100. a. What is the maximum amount of good X you can buy? What about good Y? b. Write down your budget constrain
- Suppose a consumer has an income of $30 that is spent on two goods: X and Y. The price of good X is $3.00 and the price of good Y is $1.00. Which of the following bundles of X and Y lie on the individual's budget constraint? a. 8X and 6Y b. 6X and 8Y c. 8
- Suppose a consumer has an income of $30 that is spent on two goods: X and Y. The price of good X is $1.00 and the price of good Y is $3.00. Which of the following bundles of X and Y lie on the individual's budget constraint? a. 8X and 6Y. b. 6X and 8Y. c.
- Use the following general linear supply function: Qs = 40 + 6P - 8PI + 10F where Qs is the quantity supplied of the good, P is the price of the good, PI is the price of an input, and F is the number o
- The demand for good X is given by QXd = 6000 - (1/2)PX - PY + 9PZ + (1/10)M Research shows that the prices of related goods are given by PY = $6,500 and PZ = $100, while the average income of individuals consuming this product is M = $70,000. Indicate whe
- The supply curve is given by Q_s = -200 + 20P_x - 5P_I + 0.5P_z where Q_S= quantity supplied of good X P_X = price of good X P_I= price of inputs to good X P_Z= price of good Z. a. Based on the suppl
- Suppose the demand for X is given by Q_X^d = 50 - 4P_X - 3P_Y - 5M + 3A, where P_X represents the price of good X, P_Y is the price of good Y, M is income and A is the amount of advertising on good X. Based on this information, we know that good X is a: A
- Assume the price of good X is P X , price of good Y is P Y , and B is the budget. The formula for the budget line for these two goods is a. P Y Q Y P X Q X . b. P X B + P Y B = B . c. P X X + P Y Y = B . d. ( 1 P Y B ) P X .
- Consider a consumer who consumes two goods and has utility function u(x_1, x_2) = x_2 + \sqrt{x_1}. The price of good 2 is 1, the price of good 1 is p, and income is m. Show that a) both goods are n
- Suppose a consumer has M = $120 to spend. The price of Good X is PX = $2, and the price of Good Y is PY = $3. a) Draw the consumer's budget constraint. Be sure to label your graph accurately, and identify the vertical and horizontal intercepts. (Please pu
- Assume the price of good X is Px, the price of good Y is Py, and B is the budget. The formula for the budget line for these two goods is: a. PyQy/PxQx b. PyB + PyB = B c. PxX + PyY = B d. (1 - Py/B)Px
- A good's 'choke price' is the dollar amount at which none of the good will be purchased and below which units will be purchased. If an individual's demand function for a good is given by the linear eq
- Suppose that demand for a good is given by Q = 122 - 3P, while supply for the good is given by Q = 1P - 20. The average person values their time at $12.29/hour. If a price ceiling of $11.04 is imposed, how many hours will the average person have to wait i
- Suppose an individual has preferences over two goods - good X and good Y. In response to changes in the price of good X, the individual has a positively sloped price consumption curve, where good X is drawn on the horizontal axis. Which of the following s
- Suppose for a given consumer X is an inferior good and Y is a normal good. a. Focusing on the income effect, show that an increase in the price of X will cause the consumer to "buy more" X (that is, s
- A goods choke price is the dollar amount at which none of the good will be purchased and below which units will be purchased. If an individuals demand function for a good is given by the linear equati
- Assume that a person's utility over two goods is given by U(x1, x2) = (x1 - 5)^{1/3}(x2 - 10)^{2/3} The price of good x1 is equal to p1 and the price of good x2 is p2. The total income of the individual is given by I. (a) Write down the budget constrai
- Suppose that the price of good x is p_x and the price of good y is p_y. If Jim has I to spend on x and y and his utility function over two goods is given by, U(x,y)=radicalx+?y A.Find Jim?s demand fun
- The demand for good X is estimated to be Q_x^d = 10,000 - 4 P_X + 5 P_Y + 2M + A_X, where P_X is the price of X, P_Y is the price of good Y, M is income, and A_X is the amount of advertising on X. Suppose the present price of good X is $50, P_Y = $100, M
- Consider a consumer with utility function given by u(x_1, x_2) = x_1x_2. A) Find the demands for goods 1 and 2 when the consumer faces prices p_1 and p_2, and income m. B) Are goods 1 and 2 normal goo
- Assume that utility over two goods is given by U(x1,x2) = 0.3lnx1 +0.7lnx2. The price of good x1 is equal to p1 and the price of good x2 is p2. The total income of the individual is given by I. a Writ
- Suppose the demand function for a product is Q= 200 -15P + 4I where P is the per unit price of the good, I is median household income in thousands of dollars, and Q is the number of units demanded per
- Consider two goods x1 and x2. Assume that the price of x1 changes while the price of x2 remains fixed. For these two goods the price-consumption curve illustrates the: a) optimal bundles of x1 and x2
- A consumer has a utility function, given by u(x1,x2)=rad x1 x2. Suppose the price of good 1 falls, from $5 to $2, while the price of good 2, and the consumer's income remain constant, at $10 and $100,
- Suppose a consumer has a utility function U(X, Y) = min{X, 2Y}. Suppose the consumer has $945 to spend (M = 945) and the price of good Y is 1 (P_Y = 1). Fill in the table below.
- Consider a consumer who consumes two goods and has utility of function u(x_{1},x_{2})=x_{2}+ \sqrt{x_{1 Income is m, the price of good 2 is 1, and the price of good 1 changes from p to (1+t)p. Compu
- Think of a consumer consuming two goods. Suppose you are told that at the current prices, income and optimal quantities, the elasticities of the demand for good 1 have the following values: price elas
- The price of good X is $50. a) What is the consumer's income on budget line B_1? b) What is the price of good Y on Budget line B_1? c) What is the equation of the budget line B1, given the prices and income that you have determined? d) What is the con
- Suppose there are two goods, X and Y. The utility function for these goods is given by U(X,Y) = 5X+2Y. Suppose I had $50 to spend on these two goods. Good X has a price of $5 per unit, while the price
- Consider a market characterized by the following inverse demand and supply functions: P_(x) = 10 - 2Q_(x) P_(x) = 2 + 2Q_(x) Compute the loss in social welfare when an $8 per unit price floor is
- Assume a consumer's utility function is U = (q_1)^0.5+ 2(q_2)^0.5 and her total income is $90. The price of both good 1 and good 2 is $1. (a) What is the bundle that maximizes this consumer's utility
- Suppose that Jack's utility function is U(x, y) = square root of xy. What would be Jack's optimal consumption of these two goods when his income is 72 dollars, and the prices of good x and y are 4 and 3 dollars, respectively?
- The following log-linear demand curve for a price-setting firm is estimated using the ordinary least-squares method: The estimation results are presented below: The estimated demand equation can be ex
- Suppose that the price of good X increases from $3 to $4 while the price of good Y increases from $150 to $200. The relative price of X (in terms of Y): (a) cannot be determined from the above data. (b) is completely unrelated to the price of good Y. (c)
- A consumer treats goods x and y as perfect complements always combining one unit of good x with two units of good y. Suppose prices are p_x=$6 and p_y=$2. The consumer's income is i=$60. Find this con
- The manager of a monopoly firm obtained the following estimate of the demand for its product. Q = 1000 - 100P + 0.2M - 500PR where M and PR are, respectively, consumer income and the price of a related good. The forecasted values for M and PR are M = $3
- Suppose a consumer has a utility function given by U = 4X +12Y. The price of X is $2 and the price of Y is $1. The consumer has $24 (his income) to spend on the two goods. Plot good X on the X-axis and good Y on the Y-axis.
- Lindsey is willing to purchase 4 units of good X when the price of good Y is $2. If the price of good Y rises to $3 and she purchases only 1 unit of good X at the higher price, what is her cross price elasticity of demand between goods X and Y at those pr
- A consumer consumes good x and good y. She initially has an income of I = $1,000 and faces prices of px = $10 and py = $20. Then, the price of good x doubles. In response to the rising prices, the government gives the consumer a lump-sum payment of $300.
- Suppose a consumer's utility function is U(X, Y) = X + 2Y. The consumer has $8 to spend (M = 8). The price of good Y is P_Y = $2. What are the respective demands of good X when P_X = 1/4, 1/2, 2, and 4 dollars?
- Considering the demand side of a market for a good, the consumer surplus derived by an individual: i. is the difference between the maximum amount the consumer is willing to pay for each unit and the price he/she actually pays.
- Consider a consumer with utility function given by u(x_1, x_2) = x_1x_2 . (i) Find the demands for goods 1 and 2 when the consumer faces prices p_1 \enspace and \enspace p_2 , and income m . (i
- Suppose that an individual with an income ''I'' cares about two goods, X and Y. The price of the two goods is Px and Py. The individual has the following utility function: U(X, Y) = X(2+Y) a) Find the Marshallian(uncompensated) demand for X and Y. b) Fi
- Suppose 10 units of a good are sold when the price is $2 per unit, and 14 units are sold at a price of $1 per unit. Calculate the price elasticity of demand for this good over this price range using the midpoint formula. Does your answer suggest the deman
- A household has the budget constraint y = px1 + x2 where the price of good is normalized to one. The utility function is given by: U(x1, x2) - Min (x11, 4x2) Solve the demand function x1 and x2 and utility U(x1, x2) as functions of y and p.
- Consider a market characterized by the following inverse demand and supply functions: PX = 10 - 2QX and PX = 2 + 2QX. A $4 per unit price floor will result in a
- Suppose that a representative consumer has the following utility function: U(x, y) = x^{\alpha} y^{t - \alpha}. The price of good x is p_x and the price of good y is p_r The consumer's income is equal
- Consider an individual making choices over two goods x and y with prices p x and p y with income I and the utility function u x y 2 x y Find the compensated Hicksian demand for x
- Consider the market for iphone apps. Suppose the inverse demand function for apps is p(Q) = 20 - 1/2 Q and the cost function is C(Q) = 20Q - 2Q^2 + 1/12 Q^3. A) Suppose first that the market is perfec
- Assume that the unit price of good A is $2, and the unit price of good B is $5. If an individual has income of $30, which of the following consumption bundles of (good A, good B) is on the edge of the budget constraint? A) (5,5) B) (5,4) C) (6,4) D (6
- Refer to the figure. In graph (a), what is the price of good X relative to the price of good Y (i.e., P_X/P_Y)? a. 1/4 b. 1/3 c. 3 d. 4
- Suppose there are only two goods, A and B, and that consumer income is constant. If the price of good A falls and the consumption of good B rises, we can conclude that: A) A is a normal good. B) B is a normal good. C) A is an inferior good. D) B is an
- Consider the utility function u(x, y) = 2 ln x + ln y. Initially, the prices are px = $2/unit and py = $1/unit. The consumer has an income of $18. Derive the consumer s optimal consumption bundle. Illustrate your answer with a graph.
- Consider the following utility function: U = 100X^{0.50} Y^{0.10 } A consumer faces prices of P = $1 and P =$5. Assuming that graphically good X is on the horizontal axis and good Y is on the vertical axis, suppose the consumer chooses to consume 13 unit
- When the term "price" is used in the law of demand, price refers to? a. the price of the good relative to the price of another good. b. the nominal price of the good relative to its nominal price in the previous year. c. the absolute price of the good.
- Mr. Jones' utility function is U(x,y) = xy. His income I = $20. The price of good y is p_{y} = $1/unit. Suppose the price of good x decreases from p_{x} = $2/unit to p_{x} = $1/unit. Find the substitu
- Suppose that income is m = 102, and prices are a = 2 and b = 5. Consider the following utility function: u(a,b) = (a + 2)(b +1) (i) Find the utility-maximizing quantities of a and b. (ii) What is t
- Calculate the price and income elasticities for the following demand functions. a) x(p,m) = \frac{m}{2p} b) x(p,m) = \frac{m-10}{p} (Consider only the case m 10.)
- Kayla s utility depends on her consumption of good q_1 and good q_2: Her uncompensated demands for good q_1 and good q_2 are and her compensated demands for good q_1 and good q_2 are Therefore, her expenditure function (E) is Let the price of goods q_1 in
- Suppose a consumer is willing to pay $20 for one good, $10 for a second good, and $5 for a third good, and the market price is $4. What is the consumer surplus? a. $16 b. $6 c. $1 d. $23
- Look at the figure Consumer Surplus. If the price of the good is $2, consumer surplus will equal: a. $30. b. $45. c. $60. d. $90.
- Consider the utility function u(x, y) = 2 ln x + ln y. Initially, the prices are px = $2/unit and py = $1/unit. The consumer has an income of $18. Suppose the price of good x increases to px = $3/unit. What is the new optimal consumption bundle? Illustr
- A consumer has the utility function U(x1, x2) = x1x2 and an income of 24 pounds. Initially, the price of good 1 was 1 pound and price of good 2 was 2 pounds. Then the price of good 2 rose to 3 pounds while price of good 1 stayed the same. Find the consume
- Assume the following utility function: U(x,y) = x^{0.5} y^{0.5}. Income equals $2 and the price of each good is initially $1. If the price of X was to increase to $9, and if we hold real income consta
- Suppose that the supply for potatoes is Qs=2000+200P and the demand for potatoes is Qd=4000-300P-2I, where P is Price and I is Income. Let I=500. Are potatoes a normal good or an inferior good based o
- A price-setting firm faces the following estimated demand and average variable cost functions: Qd=800,000 - 2000P + 0.7M + 4000P_{R} AVC = 500 - 0.03Q + 0.000001Q^2 where Qd is the quantity demand
- You consume goods X, Y and Z. If an increase in the price of x, (holding constant the price of Y, the price of Z and income) decrease the quantity of good Y that you consume then a. Goods X and Y are
Explore our homework questions and answers library
Browse
by subject