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1. You have the following information about good X and good Y:
Income elasticity of demand for good X: - 3
Cross - price elasticity of demand for good X with respect to the price of good Y:
2. a. What type of good is good X (i.e. is it a normal or inferior good)? Please explain your answer.
b. What is the relationship between good X and Y (i.e. whether they are substitutes or complements)? Please explain your answer.
c. With the aid of a well-labeled diagram, show what happens to equilibrium price and quantity of good X, if the price of good Y increases.
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Di9scuss what will happen in this market as it moves to a new equilibrium. If a hard freeze eliminate Brazil's premium coffee crop, what will happen to the price of the premium coffee.
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