Problem: The X-corporation produces a good (called X) that is a normal good. Its competitor, Y-Corpor., makes a substitute good that it markets under the name "Y." Good Y is an inferior good.
Q1. How will the demand for good X change if consumer incomes decrease?
Hint: Draw the original values for the demand and supply curve and then show how a decrease in income will demand. Label your curves and points, following the use of comparative statics given on page 63.
Q2. How will the demand for Good Y change if consumer incomes increase?
Hint: Again draw the original curves and show how the relevant curve will be shifted. Label accordingly.
Q3. How will the demand for good X change if the price of good Y increases?
Hint: Use comparative statics as explained above.
Q4. Is good Y a lower-quality product than good X? Explain.