Question
An economic consultant for X Corp. recently provided the firm's marketing manager with this estimate of the demand function for the firm's product: =, +
An economic consultant for X Corp. recently provided the firm's marketing manager with this estimate of the demand function for the firm's product: =, + +
Where 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 $200 per unit, good Y sells for $15 per unit, the company utilizes 2,000 units of advertising, and consumer income is $10,000.
How much of good X do consumers purchase? Are goods X and Y substitutes or complements? Is good X a normal or an inferior good?
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