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Suppose the market demand function is Qd = 5I + 10P1 - 0.4P2 , where I is income in $1,000 and P1 is price of a related good.
(a) What is the relation between these two goods?
(b) Calculate the income, cross price, and own price elasticity of demand if I = $50,000, P1 = $10 and P = $20.
(c) At what price is demand unit elastic if I = $50,000 and P1 = $10?
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