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Fali's Outfits is a well-known firm into new and trending fashion clothing in the Greater Accra region of Ghana. Following the large customer base, the firm decided to contract a consultant on how to

Fali's Outfits is a well-known firm into new and trending fashion clothing in the Greater Accra region of Ghana. Following the large customer base, the firm decided to contract a consultant on how to increase their market share from the rapid growing market it is faced with. In 2020, the economic consultant contracted presented the following demand function as the estimate of the firms' product: Q = 2000 - 2Px + 3Py + 2M + 4AX Where Of is the quantity demanded for the product of Fali's Outfit, Py is the price of the cloths produced by Fali's Outfit, Py is the price of a related product "Obroni-wawu" (second hand clothing), M is the income available to the consumer and Ay is the unit of advertisement invested into the firm's product Requirements: a) How many units of Fali's Outfits will consumer purchase, if the firms' product sells for GHC 30. Obroni-wawu sells for GHC 20, the firm expends GHC 200 on advertisement and the consumers' income is GHC 100. [2 Marks b) Is Fali's Outfit product a normal good or an inferior good? Explain your answer. [1.5 Marks c) How would you describe the relationship between Fali's Outfit cloths and Obroni-wawu? [1.5 Marks d) Derive the demand function and the inverse demand function for Fali's product. [4 Marks]

Apr 17 2021 View more View Less

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