Equilibrium price and quantity for given level of income

Reference no: EM1312321

Suppose the demand curve for a product is given by Q = 300-2P+4I where 'I' is average income measured in thousands of dollars. The supply curve is Q = 3P - 50.

a. If I=25, find the equilibrium price and quantity for this product.

b. If I increased to 50, find the equilibrium price and quantity for this product.

c. Plot the curves and indicate the results found in a. and b. above.

d. Is this good a 'normal or 'inferior' good? Explain.

Reference no: EM1312321

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