3. The demand curve is given by

QD = 500 - 5PX + 0.5I + 10PY - 2PZ

where

QD = quantity demanded of good X

PX = price of good X

I = consumer income, in thousands

PY = price of good Y

PZ = price of good Z

a. Based on the demand curve above, is X a normal or an inferior good?

b. Based on the demand curve above, what is the relationship between good X and good Y?

c. Based on the demand curve above, what is the relationship between good X and good Z?

d. What is the equation of the demand curve if consumer incomes are $30,000, the price of

good Y is $10, and the price of good Z is $20?

e. Graph the demand curve that you found in (d), showing intercepts and slope.

f. If the price of good X is $15, what is the quantity demanded? Show this point on your

demand curve.

g. Now suppose the price of good Y rises to $15.

Graph the new demand curve.

QD = 500 - 5PX + 0.5I + 10PY - 2PZ

where

QD = quantity demanded of good X

PX = price of good X

I = consumer income, in thousands

PY = price of good Y

PZ = price of good Z

a. Based on the demand curve above, is X a normal or an inferior good?

b. Based on the demand curve above, what is the relationship between good X and good Y?

c. Based on the demand curve above, what is the relationship between good X and good Z?

d. What is the equation of the demand curve if consumer incomes are $30,000, the price of

good Y is $10, and the price of good Z is $20?

e. Graph the demand curve that you found in (d), showing intercepts and slope.

f. If the price of good X is $15, what is the quantity demanded? Show this point on your

demand curve.

g. Now suppose the price of good Y rises to $15.

Graph the new demand curve.

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