1 Assume that a competitive market is currently represented

1. Assume that a competitive market is currently represented by the following supply and demand equations: Os-P-20-5P0 Qd 315-0.5P+W Where P is the price of the good, Po is the price of a related product, and W represents the consumers\' income in terms of the hourly wage.

Solution

D) since coefficient of Po=-5 which implies if price of related good increases by $1 then quantity demand of good decreases by 5units. Thus there is an inverse relation between quantity demand and price of related good which makes related good a complemetary good.

Complimentary goods are those goods which can be used together. Say x and Y are complimentary good. Thus when price of Y increases then demand of Y decreases and demand of X also decreases when X and Y are complimentary good.