QUESTION

QUESTION FOUR

An economic consultant for MCM Corporation recently provided the firm’s marketing manager with this estimate of the demand function for the firm’s product:

Qxd = 12,000 − 3Px + 4Py − 1M + 2Ax

where Qxd represents the amount consumed of good X, Px is the price of good X, Py is the price of good Y, M is income, and Ax represents the amount of advertising spent on good X. Suppose good X sells for K200 per unit, good Y sells for K15 per unit, the company utilizes 2,000 units of advertising, and consumer income is K10, 000.

I. How much of good X do consumers purchase?

II. Are goods X and Y substitutes or complements?

III. Is good X a normal or an inferior good?

Public Answer

GZWTJF The First Answerer