Reference no: EM13179512

Ross and Jennifer are the only ones who eat donuts every morning at Second Cup. So they constitute entire market for donuts at Second Cup. Ross's and Jennifer's demand functions in terms of price of donut, price of coffee and their income is as follows:

Ross's demand function is given by:

Q1=26 - 2PX + 0.01M1 + 0.4PC

Jennifer's demand function is given by:

Q2=8 - PX + 0.02M2 + 0.2PC

Where PX is price of donut; PC is price of coffee; M1 is Ross's income; M2 is Jennifer's income. Suppose Price of coffee is $10, Ross's total income is $1000 and Jennifer's total income is $2000.

A) Find market demand function for donuts. If market supply for donuts is given by following function;

QS = 5PX + 0.01M1 + 0.01M2 - 2PC

B) Find market equilibrium price for donuts? How many donuts will Ross and Jennifer demand separately at this price level?