Question

Suppose the demand function for yellow #2 pencils is represented as: Q = 5,000-1/2G + 2H. Assume that pencils are a normal good. Which one of the following statements below is true? O A. The variable H could be the price of note book paper. O B. The variable G could be the price of wood used to make pencils. OC. The vaiable H could be price of mechanical lead pencels O D. The variable G could be consumers' income.

Answer 1

In the given demand function, the variable H can be the price of the mechanical lead pencils which are the other form of pencils apart from the wood lead pencils.

Answer: Option C

Explanation:

The demand function shows the relation ship between the price of the goods and the quantity demanded of the goods which are inversely related to each other and show that with the increase in the price of the good, the quantity demanded falls. The number 5000 is an autonomous demand of the pencils. This means the demand of the pencils when the price of the pencils is zero.

The variable H is the price of the the pencil which is the mechanical lead pencil. It is the second form of the pencil. The first form of the pencil is the pencil made from the wood which is shown by the variable G in the following demand function in the question.