Part II: Market Equilibrium and Slutsky Decomposition 1) (10 points) Suppose that the demand and supply curves for green peas are given by QP = 10 - 8P and QS =2P, where P is price per pound and Q is measured in thousands of pounds. a) If the price per pound of peas is $0.50, calculate the Q and QS. b) Is this an equilibrium? . c) If not, what will be the equilibrium price and quantity? . 2) (10 points) Consider this diagram which shows the effect of a decrease in the price of good X (from BC1 to BC2). The original consumption is point A, the new consumption point B. Quantity of good y 30- 25 22 20 15 12 10 BC 12 14 Quantity of good X a) What is the original consumption for good X? b) When the price of good X goes down, what is the substitution effect for X? ") What is the income effect for X? d) Is Good X Normal, Inferior, Giffen