The estimated market demand for good X is Q = 70 - 3.5P - 0.6M + 4P
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The estimated market demand for good X is
Q̂ = 70 - 3.5P - 0.6M + 4PZ
where Q̂ is the estimated number of units of good X demanded, P is the price of the good, M is income, and PZ is the price of related good Z. (All parameter estimates are statistically significant at the 1 percent level.)
a. Is X a normal or an inferior good? Explain.
b. Are X and Z substitutes or complements? Explain.
c. At P = 10, M = 30, and PZ = 6, compute estimates for the price (Ê), income (ÊM), and cross-price elasticities (ÊXZ).
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Related Book For
Managerial Economics Foundations of Business Analysis and Strategy
ISBN: 978-0078021909
12th edition
Authors: Christopher Thomas, S. Charles Maurice
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