d) Is good 2 more likely to be an input for the production of good 1 (e.g. corn is an input for beef) or a by- product from the production of good 1 (e.g. leather is a by-product of beef)? Why?

Note that the cross-price elasticity is positive: when the price of good 2 rises, the supply of good 1 rises. This means that it is much more likely that the goods are by-products than inputs (e.g. if the price of beef went up a lot, you'd expect the supply of leather to rise).

Please answer the two questions and draw the graphs, the cross price elasticity is positive , so why is it by products , and I am confused, and for a)why higher values of A and P2 shifts the graph down> please illustrate by numerical examples, thanks

The supply function for a good 1 is given by q1 = Apfpg's a) Draw the supply curve. Label several points (with numbers). State any assumptions you make. What would the graph have looked like if you'd made different assumptions? Students here will have to assume values forA and p2. The easiest thing would be to assume that each of these equals 1, in which case the supply function is just a square function: q1 = pf, and the supply curve itself will be given by p1 = 5 Assuming higher values ofA or p2 will shift the curve down