Using functional relationship in economics QX = f (px, po, y, T); po stand for

Analyze the question: This is a demand function. It shows that the quantity demanded of commodity X (Qx) depends on several variables. We need to identify what "po" means.

Explain the concept: The demand function is usually written as:

Qx = f(Px, Po, Y, T)

where:

• Qx = quantity demanded of good X
• Px = price of good X itself
• Po = price of other goods (substitutes and complements)
• Y = income of the consumer
• T = tastes and preferences of the consumer

Step-by-step solution:

1. Qx is the quantity demanded of X, so this is a demand function.
2. px is the price of X itself (this rules out B).
3. y is the consumer's income (this rules out A, since income is already represented by y).
4. T stands for tastes.
5. The remaining variable, po, stands for the "o" in "other", meaning the price of other related commodities (substitutes or complements). This is why the price of tea can affect the demand for coffee, for example.

Options D (production function) and E (price index) do not appear in a standard demand function, so they are out.

Answer: The correct option is C. price of other commodities.

Exam tip: Remember the demand function letters as Price, Other prices, Y (income), Tastes. The subscript "o" always means "other".