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Suppose the quantity demanded of good (Qd) depends only on the price of the good (P), monthly income (M), and the price of a related good R (PR):
a. On the axes below, construct the (direct) demand curve for the good when M = $1,000 and PR = $5. The equation for demand is Qd = ________________________.
b. Interpret the intercept and slope parameters for the demand equation in part a.
c. Let income decrease to $950. Construct the new demand curve. This good is _________________ (normal, inferior). Explain using your graph.
d. For the demand curve in part c, find the inverse demand function: P = _____________________.
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