Is this statement true, false, or uncertain:
Suppose the demand function for some good X is given by QDx = 1000 - 5Px +3Py +12M, where QDx is the quantity of x demanded, Px is its price, Py is the price of good Y, and M is average consumer income. This good is normal and goods X and Y are substitutes.
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- Thread Starter
- 26-10-2015 19:29
- 27-10-2015 20:34
Hi, Queen's student The statement is true. I am also doing this assignment so I cannot share my complete answer with you, but here is some useful information:
1. A good is normal when its numerical measure of elasticity is positive, and quantity demanded increases as income increases.
2. Cross elasticity of demand states that goods are identified as substitutes when a price increase of a substitute leads to an increase in quantity demanded of this good.