The X-corporation produces a good (called X) that is normal good. It’s competitor Y-corporation makes a substitute good that it markets under the name Y. Good Y is an inferior good. i. How will the demand for good X change if consumer incomes decrease? a)

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15.07.2022 - 05:50

The X-corporation produces a good (called X) that is normal good. It’s competitor Y-corporation makes a substitute good that it markets under the name Y. Good Y is an inferior good. i. How will the demand for good X change if consumer incomes decrease? a)

Question:

The X-corporation produces a good (called X) that is normal good. It’s competitor Y-corporation makes a substitute good that it markets under the name Y. Good Y is an inferior good.

i. How will the demand for good X change if consumer incomes decrease?

a) It will decrease

b) It will stay the same

c) It will increase

ii. How will the demand for good Y change if consumer incomes increase?

a) It will stay the same

b) It will increase

c) It will decrease

iii. How will the demand for good X change if the price of good Y increases?

a) It will decrease

b) It will increase

c) It will stay the same

iv. Is good Y a lower quality product than good X?

a) Yes, good Y is a lower quality product than good X.

b) No, good Y is a higher quality product than good X.

c) Not necessarily, it could be higher or lower quality.

d) No, good Y is a product of identical quality to good X.

Answers (1)

Mary April 2, 2023 в 20:41

i. The demand for good X will decrease if consumer incomes decrease. This is because X is a normal good, meaning that as income decreases, demand for X will also decrease. ii. The demand for good Y will decrease if consumer incomes increase. This is because Y is an inferior good, meaning that as income increases, demand for Y will also decrease. iii. The demand for good X will increase if the price of good Y increases. This is because Y is a substitute good for X, and as the price of Y increases, consumers will switch to X, increasing demand for it. iv. The provided information does not give any indication of the quality comparison between good X and Y. Therefore, the correct answer is c) Not necessarily, it could be higher or lower quality.

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