Normal good or an inferior good

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Reference no: EM1320536

Q. Consider the estimate demand equation of Qx = 1,000 - 3.3Px - 0.2Pz + 0.001Y (3.5) (2.1) (0.5) with t values in parentheses, where Pz is the price of another good Z also 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?

a. Is good Z a substitute or a complement? Pz is a negative value (-0.2). It means that if the price of Z increases, demand of X will decrease also demand of X will increase if price of Z decreases. It implies that Z is a compliment.

b. Can we say confidently whether good X is a normal good or an inferior good?

Reference no: EM1320536

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