Suppose the demand for good X is given by Q^d_x = 10 + a_xP_x + a_yP_y + a_MM.If a_M is negative,then good y is:

Question

Quizplus · Accepted Answer

The coefficient $a_{M}$ being negative in the demand function for good X indicates that as income (M) increases, the demand for good X decreases. This does not directly inform us about the nature of good Y in terms of being normal or inferior. However, the presence of $a_{y}P_{y}$ in the demand equation for X suggests that good Y's price influences the demand for X. If $a_{y}$ is positive, it implies that as the price of Y increases, the demand for X increases, indicating that Y is a substitute for X. The information about $a_{M}$ being negative does not directly relate to Y being a normal or inferior good, nor does it indicate complementarity. It's the relationship between the prices of X and Y that suggests substitution.

Suppose the Demand for Good X Is Given by Qdx

Suppose the Demand for Good X Is Given by Q^d_x