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1. The demand for product x is Q = 500 - 10Px + 0.5Py -.005M, where Px is the price of good x, Py is the price of another good, and M is the income of consumers. The current price of good X is $20, the current price of good y is $16, and the income level of representative consumers is $30,000.
a. What is the elasticity of demand at the current price levels?
b. Is product Y a complement or a substitute? What is the cross-price elasticity of demand between goods X and Y?
c. Is product X a normal good or inferior good? What is the income elasticity of demand?
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