Question

***Please note: do not need #1. Just need each letter for #2 of this problem

II AT&T? 9:42 AM 27% i Back Homework 131 01 C 凸 Consider the market for pork in Tampa. The general demand function for pork in Florida is estimated to be -205-20P+0.0003M 17P+7Pc where Qu is the quantity demanded (as measured in units of millions of pounds per year), P is the price of pork (per pound), M is average annual income in Florida, Ps is the price of beef (per pound), and Pc is the price of chicken (per pound). Based on the generalized demand function, a) Does the Law of Demand hold? Why? Explain. b) Is pork considered a normal or an inferior good? Why? Explain c) Are beef and chicken substitutes or complements to pork? Why? Explain 2. Assume that average annual consumer income in Tampa is $50,000, price of beef is $ 4 per pound, and the price of chicken is $3 per pound. a) Find the direct demand function for pork in Florida. b) Find the inverse demand function for pork in Florida. c Draw the demand curve for pork in Florida. Clearly mark out any and all intercepts.

Answer 1

1.

a) Law of demand states that ceteris paribus, the price of a commodity is inversely related to the quantity demanded of the commodity. It holds in this case as the coefficient of price is negative indicates an inverse relation between demand and price of pork.

b) Pork is a normal good as the coefficient of M i.e. income is positive in the demand function.

c) As the coefficients of price of beef and price of chicken is positive means these are substitutes of pork means when price of beef or chicken increases more of pork is demanded.