After collecting and analyzing data, and estimating a regression model, you have found the following demand equation for your company's product, which is Good A:
QdA = 18,000 - 4PA + 3PB + 6M.
You have the information that PB = $60, and M = $17,000.
(Note that QdA is the quantity demanded of Good A, PA is the price of Good A, PB is the price of another product called Good B, and M stands for income available. In addition, note that the income enters the equation as $17,000.)
Use this information to answer the following five parts of this question. Show ALL your calculations.
a. For this demand equation, what is the P intercept?
b. For this demand equation, what is the Q intercept?
c. Is Good A normal good or an inferior good?
d. You are given the information that PA is $90. Now, if M decreases by 50%, how much does Qd of Good A change?
e. Are Good A and Good B substitutes or complements?
