1) (10 points) Using equations (2) and (4), graphically illustrate the supply and demand system in word or another word processor. Solve for equilibrium price (p) and quantity (q) as functions of the parameters a, b, c, and d. Be sure to label the following: a. (2 points) Axes and supply/demand curves b. (4 points) All intercepts (there should be 4) I c. (4 points) p and q* (simplify as much as possible) 2) (13 points) Set up a linear market model in excel using the numerical parameters specified below. Your grade for this section is based on your excel file. Let's suppose our parameter values are as follows: Parameter Value a -20 b 5 124 d -4 determined simultaneously. (1) q* (p%) = a + bps; a 0 supply function q$() is the supply function, q$ is the quantity supplied and pS is the supply price. Parameter a describes the hypothetical quantity of supply for a supply price of zero, and this value will be negative since supply will only begin above a certain minimum supply price (as all units supplied come at a cost). Parameter b is the slope of the supply function and indicates how much supply will increase with a unit increase in price. Often, supply and demand functions are graphically shown as inverse functions with price on the y axis and quantity on the x axis. We can rearrange (1) to get the inverse supply function (2). (2) p(q) = - +q* inverse supply function We also have linear demand qC) that depends on parameters and d and variables q and p Like before, d is the slope of the demand function indicating the decrease in units demanded with a unit increase in price. Our other parameter c indicates a point of saturation: it is where no more of the good is demanded because consumers have enough of it already (even at a price of zero, there is no more demand for the good). Graphically, this is the x-intercept. (3) q (p") = c + dp';c > 0,0