What is the equilibrium price and quantity of apples

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Reference no: EM13203777

Suppose Larry's demand for apples (call it good A) is described as

\(q_1 = 20-2P_A+4P_B-8m\) where:

PA= price of Apples

PB= price of good B (Bananas)

m = income

1.) Suppose \(P_B = m = $1\) derive Larry's demand function.

2.) Larry buys his apples from Mary. Mary supplies apples according to \(q_s = -4 +20p\) What is the equilibrium price and quantity of Apples?

3.) What is the price elasticity of demand in equilibrium? Is it elastic or inelastic?

4.) What is the income elasticity of demand in equilibrium? Are the apples normal or inferior?

5.) What is the cross elasticity of demand in equilibrium? Are the apples and bananas subsitutes or compliments?

Reference no: EM13203777

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