1. Suppose that the market demand function for the good is given by: Q{) :20_3P1+P2, where QP is the quantity demanded, P, is the price of the good and P, is the price of another good, demand for which is related. The supply curve for the good is given by Q5 = 2P, 5. (a) Suppose that the price of good 2 is $10. Solve for the competitive equilibrium price and quantity of good 1. Illustrate your answer on a graph of the market demand and supply curves. (b) At the equilibrium values, calculate the price elasticity of demand. What does this number mean? (c) Suppose that price of good 2 increases to $15. How will this affect the competitive equilibrium price and quantity of good 1? Explain, making reference to a graph. What does this tell you about the relationship between good 1 and good 2? Calculate cross-price elasticity at the new equilibrium point. What does this number mean