The estimated demand for a good is Q = 3,600 - 12P + 0.6M - 2.5PR where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. The coefficient on P:

a. should not have the same sign as the coefficient on PR.

b. should not be greater than one (in absolute value).

c. is negative as dictated by the law of demand.

d. violates the law of demand.

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30 April, 19:40

The estimated demand for a good is Q = 3,600 - 12P + 0.6M - 2.5PR where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. The coefficient on P:

a. should not have the same sign as the coefficient on PR.

b. should not be greater than one (in absolute value).

c. is negative as dictated by the law of demand.

d. violates the law of demand.

+3

Answers (1)

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Sandra Johnson · Answer 1

c

Explanation:

a. Related goods can be complementray goods or substituted goods. In case of complementary goods, price of related good is inversely related to quantity demanded. In case of substituted goods, price of related good is directly related to quantity demanded.

b. It can be greater than 1.

c. It is always negative as relationship between price and quantity demanded is inverse.

d. It doesn't violate the law of demand