QUESTION 2 (CLO 1) a. Market equilibrium is one of the fundamental concepts in economics. i. Describe market equilibrium using relevant graphs and discuss market surplus and market shortage. (5) ii. Suppose the market for kittens from an adoption centre can be described by the following equations: Demand equation: Qd = 100 - 20P Supply equation: Qs = 130 + 2P Calculate the equilibrium price (P) and quantity (Q) of kittens. Remember that a negative price for kittens is not allowed. How many kittens will be adopted by humans and how many will be "strays?" b. Economists have made estimates of the price elasticity of demand for a variety of goods and services. i. What is price elasticity of demand and why is it important to estimate it? Provide your own examples to support your answer. ii. The government commissioned a research firm, Super Consulting, to conduct a study on the market demand for cigarettes. The firm reported that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes costs $2 and the government wants to reduce smoking by 20 percent, by how much should the price increase using the midpoint method?