The extended demand function of good X is:

QDX = 1200 - 10 PX + 20 PY + 0.25 M where:

QDX = quantity demanded of good X

PX = Price of good X

PY = Price of related good Y (related in consumption to good X)

M = Average consumer income .

Fix the following variables:

PX = 400

PY = 10

Assume:

M changes from $20000 to $30000

What is the value of the income of demand [Use the arc elasticity formula.]

	a.	0.71
	b.	1.71
	c.	1.36
	d.	-0.71

QUESTION 18

Based on your answer in the previous question, good X is what type of good?

	a.	inferior
	b.	substitute
	c.	elastic
	d.	normal