What are the equilibrium price and quantity

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Reference no: EM13187396

Suppose that the generalized demand function for good X is
Qd = 60 - 2Px + 0.01M + 7Pr

where
Qd = quantity of X demanded
Px = price of X
M = (average) consumer income
Pr = price of a related good R

a. Is good X normal or inferior? Explain.
b. Are goods X and R substitutes or complements? Explain.
Suppose that M = $40,000 and Pr = $20.
c. What is the demand function for good X?
Suppose the supply function is
Qs = -600+10Px
d. What are the equilibrium price and quantity?

e. What happens to equilibrium price and quantity if other things remain the same as in part d but income increases to $52,000?

f. What happens to equilibrium price and quantity if other things remain the same as in part d but the price of good R decreases to $14?

g. What happens to equilibrium price and quantity if other things remain the same, income and the price of the related goods are at their original levels, and supply shifts to Qs = -360+10Px?

Reference no: EM13187396

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