a. Is this good a normal good or an inferior good? How do we know?
b. Is the sign correct on the coefficient in front of PI? Explain why or why not?

Now...
Assume that M = 50,000 and PI = 80.
c. What is the equilibrium price and equilibrium quantity?
d. If a price of $40 occurs in the market, rather than the equilibrium price, would we have a surplus or a shortage? Of how many units?
e. If a price of $60 occurs in the market, rather than the equilibrium price, would we have a surplus or a shortage? Of how many units?
f. If the value of M increased from 50,000 to 60,000 and nothing else changed, would the equilibrium price increase or decrease? By how much? Would the equilibrium quantity increase or decrease? By how much?

a. Is this good a normal good or an inferior good? How do we know?
Coefficient of M is positive. It implies that income elasticity of demand will be greater than zero, which shows that good X is a normal good.

b. Is the sign correct on the coefficient in front of PI? Explain why or why not?
I assume PI represents price of input. If cost of input increases, supply is expected to decrease and if input cost decreases, supply is expected to increase. So, negative sign of PI is ...

Solution Summary

The solution discusses demand, supply and equilibrium in managerial economics.

... per month (in 1,000's). Managerial Economics Homework Exercises ... The generalized demand funtion for new housing in New ... Qd is the monthly quantity demanded, p is ...

... Ivan Png Routledge, 2012 (3)Managerial Economics: Concepts and ... This solution explains the economics related to mergers ...Demand Supply Diagram Price Supply P1. ...

MANAGERIAL ECONOMICS. 1. Construct a Supply/Demand (S/D) graph, identify the initial equilibrium, then identify the new equilibrium when Supply decreases and ...

Managerial Economics. ... Graph the supply and demand curves using Excel Find the equilibrium... product is $100, what is the quantity supplied and quantity demanded? ...

Managerial Economics: Vanda-Laye oven mittens. ... The supply and demand functions for oven mittens are as follows ... 15 + 10P where Qd is the quantity demanded, Qs the ...

Managerial Economics and Globalization. ... Q = Quantity demanded of 3-pack units P (in cents) = Price of ... This section of the paper is presenting demand curve along ...

Managerial Economics. ... The French demand schedule for Maine lobsters is as follows: Price of lobster Quantity of lobsters demanded (per pound) (pounds) 25 ...