Question

Suppose that the market demand curve for maple syrup is Q_D = 1200 – 0.5P + 9P_H – 0.01M, where P is the price of maple syrup, P_H is the price of ham and M is consumer income. According to this function,

ham is a complement and maple syrup is inferior.

ham is a substitute and maple syrup is normal.

ham is a complement and maple syrup is normal.

ham is a substitute and maple syrup is inferior

Answer 1

Here d(QD)/d(PH) = 9 (positive). Therefore, if the price of ham increases the demand for maple syrup increase. This means that the maple syrup and ham are substitute goods.

Also, d(QD)/d(M) = - 0.01 (negative). Therefore if the income of the consumer increases then the demand for maple syrup decrease. this means that maple syrup is an inferior good.

Therefore the answer is option ............ ham is a substitute and maple syrup is inferior.