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Are face masks inferior goods or normal goods

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Reference no: EM132505413

a. Consider the following demand function

Suppose that price of good X is 5, price of good y is 2.5, and income is 10. Find the following;

i. Own price elasticity of demand.

ii. Cross price elasticity of demand.

iii. Are X and Y substitute or complements? Explain.

iv. Income elasticity of demand for good X.

v. Is X a normal good or inferior good? Explain.

vi. Is X a luxury good or a necessity good? Explain.

b. The global economy has been shaken by the outbreak of the covid-19.

i. With the aid of a clearly labelled diagram(s), explain what has happened to the market for face masks.

ii. Suppose that the price of face masks received a once-off increase, use a clearly labelled diagram to show the decomposition of this price change into the income and substitution effect.

iii. Are face masks inferior goods or normal goods? Why?

Reference no: EM132505413

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