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The following represents demand for widgets (a fictional product): QD = 700 – 100P + 0.05M...

The following represents demand for widgets (a fictional product):

QD = 700 – 100P + 0.05M – 30PR

where P is the price of widgets, M is income, and PR is the price of a related (fictional) good, the wodget. Supply of widgets is determined by Qs= 900 + 57.5P

Determine whether widgets are a normal or inferior good, and whether widgets and wodgets are substitutes or complements.  

Assume that M = $61,000 and PR = $250.00. Solve algebraically to determine the equilibrium price and quantity of widgets.

Now assume two events ovvur: income falls to 58,000 and supply conditions change such that Qs =-300+50P. Solve algebraically for the new equilibrium price of widgets after these two changes

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Answer #1

DE 10-1Pt 0.05H-30PR gers +57.5P COS Cocfficient af imume has Parive Sgn and Parice caeffiaient ofWhidges havicg ve Sign As w157 5 P 3050-750-2 4650 PE-285 Raice com n0t be Giv en the Stuarion demond f widyres here ue beMS5800 -300t 50P At er 005154em)7500 7o0-100p t 150P PE-24 Shols ve) Price, onien Again it 220t Possible

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