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PROBLEM (1) The demand for good X is Qp the price of a related good Y, and I is the average income level. = 120 PxPyI where px is the price of the good X, py is (a) Is x a normal good? Are x and y substitutes? (no explanation needed) (b) Does the demand become more own-price elastic (at a given px) as Ру increases?

PROBLEM (1) The demand for good X is Qp the price of a related good Y, and I is the average income level. = 120 PxPyI where px is the price of the good X, py is (a) Is x a normal good? Are x and y substitutes? (no explanation needed) (b) Does the demand become more own-price elastic (at a given px) as Ру increases?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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b only please. thankyou

PROBLEM (1) The demand for good X is QD the price of a related good Y, and I is the average income level. = 120 PxPyI where px is the price of the good X, Py is (a) Is x a normal good? Are x and y substitutes? (no explanation needed) (b) Does the demand become more own-price elastic (at a given Px) as py increases?
Transcribed Image Text:PROBLEM (1) The demand for good X is QD the price of a related good Y, and I is the average income level. = 120 PxPyI where px is the price of the good X, Py is (a) Is x a normal good? Are x and y substitutes? (no explanation needed) (b) Does the demand become more own-price elastic (at a given Px) as py increases?
Expert Solution
Step 1

Given demand equation for good X :-

QD = 120 - pxpyI

 

For answering this question, we will assume 2 values of py,  py=1 and py=2

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