Question

Suppose that there are two commodities x and y. Jim’s demand for commodity x as a function of prices and income is given by Qx(px,py,W)=W/(px+2py). What is the expression for Jim’s demand for commodity y as a function of prices and income?

Answer 1

Qy(px,py,W)=W/(px+2py)

Explanation:

From the question, we have:

Qx(px,py,W)=W/(px+2py) .............................. (1)

Equation (1) implies that the demanded for commodity x is determined by its own price, px, price of commodity y, py, and the total income of the consumer, W.

When we have this kind of demand function, it implies that demand for each good not only depends on its own price but also the price of other commodity and the income of the consumer. This statement can be employed to get and expression for Jim’s demand for commodity y as a function of prices and income as follows:

Qy(px,py,W)=W/(px+2py) ........................... (2)

Equation (2) two therefore also implies that the demanded for commodity y is determined by its own price, py, price of commodity x, py, and the total income of the consumer, W.