Question : What is meant by the sentence "Demand functions are homogeneous of degree zero" : 7523
What is meant by the sentence "Demand functions are homogeneous of degree zero"? Try to avoid technical expressions in your answer. Explain why the property of demand functions given in part (a) must hold. An econometrician estimates that the demand for chewing gum (x) is given by the following equation: x = 20 + 30p_x^-2 + 0.5 Mpx^-0.5 (M is consumer income and p_x is the price of chewing gum.) Is this a genuine demand function? Provide an explanation for your answer. State the monotonicity axiom of consumer theory. Does this eliminate the possibility of inferior goods?