Calculate the point price elasticity of demand and income

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Reference no: EM13192100

The demand and supply functions for peaches are:

Qd=20-2P+10M+5Pa
Qs=20+10P+50R

where P is the price of peaches, M is income, Pa is the price of apricots, and R is rainfall. Assume that M= 30, Pa =8 and R=4 .

(a) Calculate the equilibrium quantity and price for peaches.

(b) Calculate the point price elasticity of demand and point income elasticity for peaches at the equilibrium. Also calculate the point cross price elasticity between peaches and apricots at the equilibrium.

(c) Based on your answers in (b):
(i) Are peaches a normal good or an inferior good?
(ii) Are peaches and apricots substitutes or complements

Reference no: EM13192100

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