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Suppose that the demand and supply functions for good x are given as follows: O. = 120 -2P, + 1 + P, and Q =-30+
Suppose that the demand and supply functions for good x are given as follows: O. = 120 -2P, + 1 + P, and Q =-30+ P - 21 +s -2f where Px denotes the price of good x, P, denotes the price of a related product y. I denotes income, t denotes tax firms face, s denotes subsidy and f denotes factor prices. Suppose also that exogenous variables are given as follows: Income (1) = 450, Price of the related product ( P. ) = 30, tax (t) =24. subsidy (s)=15 and factor prices (f) 36 What is the cross price elasticity of demand at the equilibrium? 0.23 and thus products x and y are substitutes. 0.27 and thus products x and y are substitutes. -0.23 and thus products x and y are complements. Q-0.27 and thus products x and y are complements
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