Copyright

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

Become a Study.com member to unlock this answer!

View this answer

1) 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...

See full answer below.


Learn more about this topic:

Loading...
Income Elasticity of Demand in Microeconomics

from

Chapter 2 / Lesson 13
9.3K

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.


Related to this Question

Explore our homework questions and answers library