1. When do we consider two commodities to be complements or substitutes? It is considered both products and services as a substitute or complementary when the price of goods purchased gets increased to such a level that the consumer purchasing power will be affected less looking for a good price that is similar or lower the purchase quantities where his purchasing power allows.
2. What must be true for a good to be normal and a necessity? To be a normal product, the consumer wants to get the product to meet a pleasure, desire or fill a void but to acquire that goods can choose and take into consideration the price, quality and quantity. As a product of necessity, the consumer needs as a priority the product to meet a need. A product of need is one product that meets your need and desire at the time but does not consider price or other qualities such as: the consumer is thirsty and drinks only water and the only thing left is soda. Buy the soda to satisfy your need and eliminate thirst.
3. Evaluate the following statements as true or false and explain why.
a. A 20% increase in the price of XBOX will decrease the demand for XBOX. True, by increasing the price of Xbox would decrease demand for purchase and even seek even substitute (playstation) or seek other qualities that can satisfy your need. Those brand loyal consumers will still be getting the Xbox and other consumers for their reasons but the number one factor that consumers do not want a product demand is affecting the price increase.
b. If income decreases during a recession and the demand for XBOX also decreases, then XBOX can be considered an inferior good. False, not considered to be an inferior product to have a recession, it is normal to lower demand as the recession affects the vast majority of the market and the consumer in turn makes it difficult to acquire a good, because the purchasing power decreases. The product is affected by the...