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The demand function for good X is as follows:

Qdx = -Px + 3Py - Y
If Py = €2000 and Y = €1000 what is the demand function for good X?

1 Answer

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Final answer:

The demand function for good X, given Py = €2000 and Y = €1000, is Qdx = -Px + 5000. It suggests a negative relationship between the price of good X and its demand, while also incorporating the effects of related good prices and income on demand.

Step-by-step explanation:

The original demand function you provided is Qdx = -Px + 3Py - Y. Given the values Py = €2000 and Y = €1000, we can substitute these into the equation to determine the new demand function for good X. After substitution, your new demand function becomes Qdx = -Px + 6000 - 1000. Simplifying this, we get Qdx = -Px + 5000. This means that the demand for good X is affected by its price and it will increase by 5000 units when the price is zero. Note that -Px represents a negative relationship between the quantity demanded for good X and its price; as the price rises, the demand decreases. Similarly, the constants reflect how changes in prices of related goods (Py) and income (Y) affect demand.

User Daniel Jennings
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