Homework3

Homework3 - Homework #3 Due Date: Wednesday, March 23rd...

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Homework #3 Due Date: Wednesday, March 23rd Note: Only one randomly selected question will be graded. Question 1 There is a clothing company, the Cheap Apparel. The demand function for clothes produced by the Cheap Apparel is P = 100 - 1 2 Q . The supply function for them is P = 1 4 Q . (a) Find the market equilibrium. (b) Recently, the price of clothes produced by the Lavish Fashion decreased by 10%. Some consumers for the Cheap Apparel moved to the Lavish Fashion. The new demand function P = 80 - 1 2 Q . Find the new equilibrium and calculate the cross- price elasticity of demand between two equilibria. (the price of the Lavish Fashion on the demand of the Cheap Apparel) Are the clothes by the Cheap Apparel substitutes, complements, or non-related of the clothes by the Lavish Fashion? (c) Now, the income of consumers increased by 10%. Some consumers for the Cheap Apparel moved to the Lavish Fashion. The new demand function P = 90 - 1 2 Q . Find the new equilibrium and calculate the income elasticity of demand between
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Homework3 - Homework #3 Due Date: Wednesday, March 23rd...

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