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The demand for a particular product is given by
Qdx= 1000 -20Px + 10PS - 10PC + 6M
The supply for that product is given by
Qxs = -180 + 40Px -40C
P = the price of the good; PS = the price of a substitute; PC = the price of a complement; M = the consumer's income; C = the marginal cost of producing the good.
Suppose PS = 5; PC = 8, M = 25, C = 20.
-Calculate the equilibrium price and quantity in this market.
Now suppose that the price of a substitute rises to 11.
-Calculate the new equilibrium price and quantity.
-How does the price and quantity compare to the original price and quantity?
-How does the increase in the price of the substitute affect the demand for the good?
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