The general demand function for goodAis

Q_d= 600 4P_A 0.03M 12P_B+ 15+ 6P_e+ 1.5N

whereQ_d= quantity demanded of goodAeach month,P_A= price of goodA, M= average household income,P_B= price of related goodB,= a consumer taste index

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ranging in value from 0 to 10 (the highest rating),P_e= price consumers expect to pay next month for goodA,andN= number of buyers in the market for goodA.

a.Interpret the intercept parameter in the general demand function.

b.What is the value of the slope parameter for the price of goodA? Does it have the correct algebraic sign? Why?

c.Interpret the slope parameter for income. Is goodAnormal or inferior? Explain.

d.Are goodsAandBsubstitutes or complements? Explain. Interpret the slope parameter for the price of goodB.

e.Are the algebraic signs on the slope parameters for,P_e,andNcorrect? Explain.

f.Calculate the quantity demanded of goodAwhenP_A= $5,M= $25,000,P_B= $40,= 6.5,P_e= $5.25, andN= 2,000.

2.Consider the general demand function:

Q_d= 8,000 16P+ 0.75M+ 30P_R

a.Derive the equation for the demand function whenM= $30,000 andP_R= $50.

b.Interpret the intercept and slope parameters of the demand function derived in parta.

c.Sketch a graph of the demand function in parta.Where does the demand function intersect the quantity-demanded axis? Where does it intersect the price axis?

d.Using the demand function from parta,calculate the quantity demanded when the price of the good is $1,000 and when the price is $1,500.

e.Derive the inverse of the demand function in parta.Using the inverse demand function, calculate the demand price for 24,000 units of the good. Give an interpretation of this demand price.

3.The demand curve for goodXpasses through the pointP= $2 andQ_d= 35. Give two interpretations of this point on the demand curve.

4.Recall that the general demand function for the demand curves inFigure 2.2is

Q_d= 3,200 10P+ 0.05M+ 24P_R

Derive the demand function forD₂inFigure 2.2. Recall that forD₂income is $52,000 and the price of the related good is $200