Chap_2_Solutions_Odd

Chap_2_Solutions_Odd - Chapter 2: Answers to Questions and...

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Chapter 2: Answers to Questions and Problems 1. a. Since X is a normal good, an increase in income will lead to an increase in the demand for X (the demand curve for X will shift to the right). b. Since Y is an inferior good, a decrease in income will lead to an increase in the demand for good Y (the demand curve for Y will shift to the right). c. Since goods X and Y are substitutes, a decrease in the price of good Y will lead to a decrease in the demand for good X (the demand curve for X will shift to the left). d. No. The term “inferior good” does not mean “inferior quality,” it simply means that income and consumption are inversely related. 2. 3. a. ( 29 ( 29 50 0.5 500 5 30 50 s x Q = - + - = units. b. Notice that although ( 29 ( 29 50 0.5 50 5 30 175 s x Q = - + - = - , negative output is impossible. Thus, quantity supplied is zero. c. To find the supply function, insert 30 z P = into the supply equation to obtain ( 29 50 0.5 5 30 200 0.5 s x x x Q P P = - + - = - + . Thus, the supply equation is 200 0.5 s x x Q P = - + . To obtain the inverse supply equation, simply solve this equation for x P to obtain 400 2 s x x P Q = + . The inverse supply function is graphed in Figure 2-1. $0.0
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Chap_2_Solutions_Odd - Chapter 2: Answers to Questions and...

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