Suppose the demand for good x is ln Q_x^d = 21 - 0.8 ln P_x - 1.6 ln P_y + 6.2 ln M + 0.4 ln A_x. Then we know good x is:

A. an inferior good

B. An elastic good

C. A Normal Good

D. A Giffen good

Please explain how you determine the answer

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Chika IlonahLv10

28 Sep 2019

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Suppose the demand for X is given by Qxd = 100 + 2PX + 4PY + 10M + 2A, where PX represents the price of good X, PY is the price of good Y, M is income, and A is the amount of advertising on good X. Good X is:

a. an inferior good.

b. a normal good.

c. a Giffen good.

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3. The empirical demand function for good X is estimated in log-linear form as ln Q = 11.74209 - 1.65 ln P + 0.8 ln M - 2.5 ln PY where Q is the estimated number of units of good X demanded, P is the price of X, M is income, and PY is the price of related good Y. (All parameter estimates are significantly different from 0 at the 5 percent level.)

a. Is X a normal or an inferior good? Explain.

b. Are X and Y substitutes or complements? Explain.

c. Express the empirical demand function in the alternative (nonlogarithmic) form: Q=_______.

d. At P = 50, M = 36,000, and PY = 25, what are the estimated price, income, and cross-price elasticities? What is the predicted number of units of good X demanded?