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Refer the following book Page No 60 t0 69 https://mnaeemiqbal.files.wordpress.com/2014/03/managerial-economics-michael-baye.pdf

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Refer the following book Page No 60 t0 69

https://mnaeemiqbal.files.wordpress.com/2014/03/managerial-economics-michael-baye.pdf

The X-corporation produces a good (called X) that is a normal good. Its competitor, Y-Corpor., makes a substitute good that it markets under the name “Y.” Good Y is an inferior good.

How  will the demand for good X change if consumer incomes decrease?

Hint: Draw the original values for the demand and supply curve and then show how a decrease in income will demand. Label your curves and points, following the use of comparative statics given on page 63.

How  will the demand for Good Y change if consumer incomes increase?

Hint: Again draw the original curves and show how the relevant curve will be shifted. Label accordingly.

How  will the demand for good X change if the price of good Y increases?Hint: Use comparative statics as explained above. Is good Y a lower-quality product than good X? Explain

 
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