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Suppose the demand function is given by Qₓᵈ=8Pₓ⁰.⁵ Pᵧ⁰.²⁵ M⁰.¹²H. Then good x is

A. A normal good.
B. A complement for good y.
C. Perfectly inelastic.
D. An inferior good.

User Flaviut
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1 Answer

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Final answer:

The demand function given shows that good x is a normal good, meaning its quantity demanded increases as income and other factors rise.

Step-by-step explanation:

The demand function given, Qₓᵈ = 8Pₓ⁰.⁵ Pᵧ⁰.²⁵ M⁰.¹²H, represents the relationship between the quantity demanded of good x and its price (Pₓ), the price of another good (Pᵧ), and the consumer's income (M) and other factors (H). In this case, the demand function includes the variables Pₓ, Pᵧ, M, and H raised to different exponents, which shows how changes in these variables affect the quantity demanded of good x.

Since the demand function does not include any negative signs or terms that indicate a decrease in quantity demanded as any of the variables rise, good x is not inferior. Therefore, the correct answer is A. Good x is a normal good, meaning as income and other factors rise, the quantity demanded of good x also increases.

User Perry
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