Consider the estimate demand equation of
Qx = 1,000 - 3.3Px - 0.2Pz + 0.001Y
(3.5) (2.1) (0.5)
With t values in parentheses, where Pz is the price of another good Z, and Y is income. Is good Z a substitute or a complement? Can we say confidently whether good X is a normal good or an inferior good?
Is good Z a substitute or a complement?
Pz is a negative value (-0.2). It means that if the price of Z increases, demand of X will decrease and demand of X will increase if price of Z decreases. It implies that Z is a compliment.
Can we say confidently whether good X is a normal good or an inferior good?