i need Q10 solutionQ8 is just for reference 10. For the first demand function of Question 8, is Good 1 a gross complement or agross substitute for Good 2? Explain. 8. Suppose there are 2 goods in the economy and the demand function for Good 1 isgiven bymP₁ + ap₂Is this a normal or inferior good? What if the demand function was instead givenbyx₁(m, P₁, P₂) =x₁ (m, p₁, P₂) =P₁m+ ap₂

Answered: 8. Suppose there are 2 goods in the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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i need Q10 solution

Q8 is just for reference

10. For the first demand function of Question 8, is Good 1 a gross complement or a
gross substitute for Good 2? Explain.

8. Suppose there are 2 goods in the economy and the demand function for Good 1 is
given by
m
P₁ + ap₂
Is this a normal or inferior good? What if the demand function was instead given
by
x₁(m, P₁, P₂) =
x₁ (m, p₁, P₂) =
P₁
m+ ap₂

Expert Solution

Step 1

For a bundle of goods to be complementing in nature , the demand for the good should increase if the price of complementing good declines and vice -versa .

Whereas goods to be substitutes the own demand should decline if the price of substitute good declines . As the consumer will consume the other cheaper substitute .

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