Consider the estimate demand equation of: Qx =1000-3.3Px - 0.2Pz +0.001Y (3.5) (2.1) (0.5) t...
Question:
Consider the estimate demand equation of:
{eq}Qx =1000-3.3Px - 0.2Pz +0.001Y {/eq}
(3.5) (2.1) (0.5)
t values in parenthesis, where Pz is the price of another good Z, and Y is income.
Is good Z a substitute or a complement?
Can we say confidently whether good X is a normal good or an inferior good?
Normal and Inferior good:
For a normal good, as the income of a consumer rises, then the demand for a product also increases, and as the income of a consumer falls, then the demand for a product also falls.
In the inferior good, as the income of a consumer rises, then the demand for a product falls, and as the income of a consumer falls then the demand for a product increases.
Answer and Explanation: 1
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View this answer1) Complementary goods are those goods which show the inverse relationship between the price of related good and demand for own good such that as the...
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Income Elasticity of Demand in Microeconomics
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Chapter 2 / Lesson 13
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In microeconomics, the principle of income elasticity of demand, which illustrates the relationship between demand and income, is important to understand the field as a whole. In this lesson, dive into the definition of income elasticity of demand and understand how it impacts normal goods, necessities, and inferior goods.
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