The demand for good X is given by this equation:
QX =1.0–2.0PX +0.8I+1.5PY –3PZ+1.0A
Where PX, PY, and PZ represent the prices of goods X, Y, and Z;
I measures income per capita; and A is advertising. Currently:
PX =2.00,PY =2.50,PZ =1.00,I=4,andA=3.05.
Is good X a necessity or a luxury good? How do you know?
Calculate the cross elasticity of demand for X with respect to the price of good Z. Are goods X and Z substitutes or complements?