Suppose the market for ice cream is characterized by the following demand curves:

Q^D=120-5P

Q^S=-40+3P

1. Calculate the equilibrium price and quantity.
2. Graph the equilibrium price and quantity.
3. Suppose that frozen yogurt (a substitute for ice cream) increases in price. Describe how this will influence the S-D equilibrium. How will the equilibrium change relative to the equilibrium before the price change?
4. Suppose now that all ice cream makers use labourers to produce ice cream. Further suppose that all ice cream makers pay their employees at minimum wage. Further (further) suppose that all people that buy ice cream are ice cream labourers/employees. If the minimum wage rate increases and ice cream is an inferior good, what will be the overall effect on the initial equilibrium? Are the new equilibrium price and quantity unambiguously higher or lower than the old? How do you know? Note: For simplicity, assume that regardless of the increase in minimum wage and potential S-D shocks, the number of labourers in the ice cream market and the number of hours worked by each labourer remains constant.