Question 2 [15 marks total] Canco is a major producer of steel. Management estimates that the demand for the company's steel is 0:\"; 5000 10-DCIPM,+100 Pumm-I-DJ I Where Q?\" is steel demand in thousands of tonnes per year. Pm, is the price of steel in dollars per kilo. Pdmjm is the price of aluminum in dollars per kilo. I is income, per capita. Initially, the price of steel is $2 per kilo, income per capita is $40,000 and the price of aluminum is $1.60 per kilo. 1) What quantity of steel will he demanded at the initial prices and income? (1 mark] 2) Calculate the price elasticity of demand for steel, at the initial prices and income. {2 marks) 3) Based on the price elasticity of demand, would an increase in the price of steel cause total revenues for Canco to rise, fall or remain the same? Explain. [2 marks) 4) Calculate the crossprice elasticity of demand between steel and aluminum, at the initial prices and income. (2 marks) {Question 2, continued] 5) Based on you: calculations, are steel and aluminum substitutes or complements? Explain. {2 marks] 6) Calculate the income elasticity of demand for steel, at the initial prices and income. (2 marks) 7') Based on your calculations, is steel a normal or inferior good? Explain. [2 marks) 3) If the objective is to maintain the quantity of steel demanded as calculated in part [1) above, what reduction in steel prices {in Elia) would be necessary to compensate for a 25% reduction in the price of aluminum? [2 marks)