Various beverages are sold by roving vendors at Busch Stadium, home of the Saint Louis Cardinals. Demand and supply of the product are both highly sensitive to changes in the weather. During summer months the demand for ice cold beverages grows rapidly. On the other hand, hot, dry weather has an adverse effect on supply in that it taxes the stamina of the vendor carrying his or her goods up and down many flights of stairs. The only competition to this service maybe beverages purchased at kiosks in the stadium. Demand and supply functions for ice cold beverages per game are as follows QDX = 20,000 – 10,000P + 20,000PK + 2Y + 500T QSX = 2,000 + 60,000P – 900PL – 1,000PC – 200T Where P is the average price of an ice cold beverage ($ per beverage) PK is the average price of beverages sold at kiosks Y is the average income level of baseball fans T is the average daily temperature (F o Degrees) PL is the average price of labor ($ per hour) PC is the average cost of capital in percent

Requirements:

1. When quantity is expressed as a function of price what are the ice cold beverage demand and supply curves when P = $11; PK = $1.50; Y = $25,000; T = 800 F; PL = $10, and PC = 12 % (Note for PC do not use decimal equivalent)

2. Show the supply curve equation with P = f (QSX)

3. Show the demand curve equation with P = f (QDX)

4. Calculate the equilibrium price and quantity

5. Calculate the prices necessary to sell and purchase the following QX: 55,000 to 130,000 beverages in increments of 15,000 beverages

6. Is PK a substitute good or complimentary good? Why?