The estimated demand for a good is $\hat { Q } = 4,800 - 16 P - 0.65 M - 1.5 P _ { R }$ where Q is the quantity demanded of the good,P is the price of the good,M is income,and $P _ { R }$ is the price of related good R.If income decreases by $2,000,all else constant,quantity demanded will ________ by _________ units.
A)increase; 1.30 units
B)decrease; 6.5 units
C)increase; 1,300 units
D)decrease; 65 units

Question

Quizplus · Accepted Answer

The coefficient of M is -0.65, so a decrease in income by $2,000 will increase quantity demanded by $0.65 \times 2,000 = 1,300$ units.

The Estimated Demand for a Good Is Q^=4,800−16P−0.65M−1.5PR\hat { Q } = 4,800 - 16 P - 0.65 M - 1.5 P _ { R }Q^​=4,800−16P−0.65M−1.5PR​

The Estimated Demand for a Good Is $\hat { Q } = 4,800 - 16 P - 0.65 M - 1.5 P _ { R }$