Starbucks business produces a good (called X) that is a normal good. Its competitor, ABC INC., makes a substitute good that it markets under the name "Y." Good Y is an inferior good.
INSTRUCTIONS: SHOW YOUR STEPS for each part below. Don't change the question
a. How will the demand for good X change if consumer incomes increase?
Hint: Draw the original values for the demand curve and then show how an increase in income will affect demand. Label the curves and points.
b. How will the demand for Good Y change if consumer incomes increase?
Hint: Again draw the original curve and show how the relevant curve will be shifted. Label accordingly.
c. How will the demand for good X change if the price of good Y decreases?
Hint: Use separate discussion for good X and good Y( graphs are useful as well).
d. Is good Y a lower-quality product than good X? Explain
Hints: see your text-book