The general demand function for good A is

Qd = 600 - 4P_A - 0.03M - 12P_B + 15T + 6P_E + 1.5N

Where Qd = quantity demanded of good A each month, P_A = price of good A, M = average household income, P_B = price of related good B, T = consumer taste index ranging in value from 0 to 10 (the highest rating), P_E = price consumers expect to pay next month for good A, and N = number of buyers in the market for good A.

a)Interpret the intercept parameter in the above demand function.

(2 marks)

b)What is the value of the slope parameter for the price of good A? Does it have the correct algebraic sign? Why do you say so?

(2 marks)

c)Interpret the slope parameter for income. Is good A normal or inferior? Explain.

(3 marks)

d)Are goods A and B substitutes or complements? Explain.

(2 marks)

e)Are the algebraic signs on the slope parameters for T, P_E and N correct? Explain.

(3 marks)

f)Calculate the quantity demanded of good A when P_A = RM5, M = RM25,000, P_B = RM40, T = 6.5, P_E = RM5.25 and N = 2,000.

(2 marks)