Use the following general linear demand relation to answer questions 36 through 41:

where P is the price of good X, M is income, and is the price of a related good, R.
-If income increases to $100,000 and the price of the related good is now $20, what is the demand function?

Question

Use the following general linear demand relation to answer questions 36 through 41:
  
where P is the price of good X, M is income, and  is the price of a related good, R.
-If income increases to $100,000 and the price of the related good is now $20, what is the demand function?

Quizplus · Accepted Answer

The demand function is not directly determined by income or the price of a related good. Instead, it is defined by the relationship between the quantity demanded and the price of the good itself. Option D, Q_d= 400-5P, is a valid form of a demand function, indicating that as the price (P) increases, the quantity demanded decreases, which aligns with the basic principle of demand. The other options either have a different slope or intercept, which doesn't directly relate to the given income and price of the related good information.

Use the Following General Linear Demand Relation to Answer Questions