a.Consider the following demand function

Q_x= 50- 2P_x+ 4P_y- 4i

Suppose that price of good X is 5, price of good y is 2.5, and income is 10. Find the following;

i.Own price elasticity of demand.

ii.Cross price elasticity of demand.

iii.Are X and Y substitute or complements? Explain.

iv.Income elasticity of demand for good X.

v.Is X a normal good or inferior good? Explain.

vi.Is X a luxury good or a necessity good? Explain.

b.The global economy has been shaken by the outbreak of the covid-19.

i.With the aid of a clearly labelled diagram(s), explain what has happened to the market for face masks.

ii.Suppose that the price of face masks received a once-off increase, use a clearly labelled diagram to show the decomposition of this price change into the income and substitution effect.

Are face masks inferior goods or normal goods? Why?