a.complements since the coefficient on M is positive.
b.substitutes since the coefficient on M is positive.
c.complements since the coefficient on is positive.
d.substitutes since the coefficient on is positive.
-estimated demand for a good is where Q is the quantity demanded of the good,P is the price of the good,M is income,and is the price of related good R.The coefficient on P
A)violates the law of demand.
B)is negative as dictated by the law of demand.
C)should not be greater than one in absolute value).
D)should have the same sign as the coefficient on .
E)both c and d

Question

a.complements since the coefficient on M is positive.
b.substitutes since the coefficient on M is positive.
c.complements since the coefficient on  is positive.
d.substitutes since the coefficient on  is positive.
-estimated demand for a good is  where Q is the quantity demanded of the good,P is the price of the good,M is income,and  is the price of related good R.The coefficient on P
A)violates the law of demand. 
B)is negative as dictated by the law of demand. 
C)should not be greater than one in absolute value). 
D)should have the same sign as the coefficient on . 
E)both c and d

Quizplus · Accepted Answer

The coefficient on P in the estimated demand function is negative as dictated by the law of demand. When the price of a good increases, consumers typically demand less of that good since it becomes relatively more expensive compared to other goods. Therefore, the coefficient on the price variable in a demand function should be negative. The other options are incorrect as they do not follow the basic principles of demand theory.

A.complements Since the Coefficient on M Is Positive