The generalized demand and supply functions

| June 14, 2018

The
generalized demand and supply functions for good X are

Qxd = 100 – 2PX + 0.01M + 8PY -4Pz Qxs = 50 + 3PX – 26PI + PT

Where
Qxd= quantity
demanded of good X
Px = price
of good X
M =
consumer income
PY
= price of good Y
Pz= price of good Z

Qxs = quantity supplied of good X
Px = price
of good X
PI =
price of input I
PT=
price of technology T

a.
Does the Law of Demand
hold in this demand equation? How do you know?

b.
Does the Law of Supply
hold in this supply equation? How do you know?

c.
Are good X and
good Y substitutes or complements? How do you know?

d.
Are good X and good Z substitutes or complements? How do you know?

e.
Is good X a normal good or an inferior good? How
do you know?

f.
What is the demand
function whenM = $2,000, PY
= $10 and PZ = $25?

g.
What is the supply
function whenPI =
$10 and PT = $20?

h.
Solve for the
equilibrium price (Po) and
the equilibrium quantity (Qo).

i.
Find the inverse
demand function.

j.
Find the inverse
supply function.

k.
Sketch the graph of
this market.

l.
Suppose that incomes increase
to $2,500. Solve for the new equilibrium price (P1) and the new equilibrium quantity (Q1).

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