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2a) Pig producers face new regulations that requires more extensive treatment and handling of pig manure. The new regulation makes the production more costly. Pork prices are usually stated in dollars per cwt (dollars per 100 pounds). Assume that the manure regulations increase the per cut pig production costs by an amount equal to 2% of the current price. The current pig price is $50/cwt. We have the following information about elasticities in the pork market: Elasticity of Pork Supply 2.15 Own-Price Elasticity of Pork Demand -1.96 Cross-Price Elasticity of Pork Demand with Respect to Beef Prices 0.60 How will the new regulations affect the equilibrium price and quantity of pork? Hint: From the producers' perspective, a cost increase in a competitive market can be equated as a corresponding price decrease. 2b) Beef prices are expected to rise 10%. How will the hike in beef prices affect the price and quantity in the pork market? 2c) The two preceding exercises are partial equilibrium models since they only consider what happens in the pork market in isolation. More realistically, there would be feedback effects between the pork and beef market. Assume a general equilibrium model where what happens in the pork market also affects the beef market and vice versa. Using the additional information about elasticities from the beef market below, how will the results from la) be modified in this case? Elasticity of Beef Supply 0.40 Own-Price Elasticity of Beef Demand -0.90 Cross-Price Elasticity of Beef Demand with Respect to Pork Prices 0.26 Hint: The solutions depends on a system of four equations (supply and demand for the two markets)