Question

Suppose you are given the following market demand function for apples: QD = QD (P. I, Psub) where Pis the price per unit of apples, I is consumer income and Psub is the price per unit of grapes (a substitute for apples). Explain the market demand function in words: O Market-level quantity demanded for apples only depends on the price per unit of apples O Market-level quantity demanded for applies depends on quantity of apples, the price per unit of apples, consumer income and the price per unit of grapes. O Market-level quantity demanded for apples only depends on consumer income and the price per unit of grapes. O Market-level quantity demanded for apples depends on the price per unit of apples, consumer income and the price per unit of grapes.

Answer 1

1) option D)

2) option. B)

as P rises, Qd will fall, from law of demand

3) option C)

Normal goods , when Quantity Demanded rises with income

Inferior good : Qd falls with rise in income

Giffen good is also a inferior good

4) option C)

for substitute goods, as price of substitute good increases, Quantity Demanded of the other good will rise

So positively related

dQd/dPsub > 0

5) option A)