2. This question has three parts, (a), (b) and (c).

(a) Explain incomplete linear demand and supply using appropriate functional forms and examples of your choice.

(b) Consider the following demand and supply functions for wool Qd = 20 -1.75P+0.7Y+0.6Pc Qs = -10+0.25P-0.5PL+1.5T Where, Qd and Qs are quantity demanded and supplied, respectively. P is price of wool, Y is income, Pc is price of cotton, PL is price of labour and T is technology. Let, Pc=2, PL= 1, T=3 and Y=4. Compute the equilibrium price and quantities of wool. If income rises by 2 so new income is Ynew=8 and PL rises by 1 so the new price of labour is PLnew =1.5, what are the new equilibrium price and quantities in the wool market? Use appropriate diagrams.

(c) Suppose demand elasticity of newly invented electric cars is Ed = -1.48 and supply elasticity Es= 1.75. These elasticities are estimated for the price of the cars P= A$40000 and quantity of car Q= 200000. Find the linear approximation of the incomplete demand and supply curves. What are the market equilibrium price and quantities?