Consider the following general demand and supply functions:

_d =320010P +0.0524P_r

_s =100+20P 10P_I +20F

where QD and QS are quantities demanded and supplied, respectively, P is price of the good, M is household income, PR is price of a related good, PI is price of an important input, and F is number of firms in the industry.

(a)Elucidate the meaning of the coefficient of household income (M). What does it tell you about the type of the good?

(b)Elucidate the meaning of the coefficient of the price of the related good (PR). What does it tell you about the relationship between the goods?

(c)Suppose household income is $60,000, price of good related good is $200, price of the important input is $100, and number of firms in the industry is 25. Determine the equilibrium price and quantity.

(d)Given price of the important input increases to $160, determine the equilibrium price and quantity.

(e)Following part (d), what happens if the government impose a price ceiling at $70?