2. (8 marks)

Suppose Shadow is an ice-cream seller. She sells both ice-cream and Good A. 1,600 units of ice-cream are sold. The price of ice-cream is $15 and the price of Good A is $20. The estimated linear demand for her ice-cream is Q = 2,200 30P + 50PA 0.02 I, where Q = units of ice-cream P = price of ice-cream PA = price of Good A I = average household income level

a. What is the cross-price elasticity of demand for ice-cream sold by Shadow? Show your steps. Interpret the value. Based on this, explain ONE reasonable example of Good A. (5 marks)

b. With the adverse influence of the pandemic, a severe recession attacks this economy. Based on the given demand function, briefly explain how this will affect the sales of ice-cream sold by Shadow. (3 marks)