Assume that demand for a commodity is represented by the equation P = 10 – 0.2 Q d, and supply by the equation P = 2 + 0.2 Qs where Qd and Q s are quantity demanded and quantity supplied, respectively, and P is the Price. Use the equilibrium condition Qs = Qd,
Equilibrium price = 10
Equilibrium quantity= 20
1. Assume the demand for this product increases because of a change in income.
A: Graph the new demand curve and label as D 2.
B: What will be the new equilibrium price and quantity compare to the initial one.
C. Is this product normal good or inferior good?