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COHSIEIEI' a market for EWO Eilerentlated products. Demand for gOOEl I IS glven 5y 4 2 D1(P1,p2) = 130 - 'Pi + '192 3 3 and demand for product 2 is 4 2 D2(P1=P2) = 130 3102 + 3201 where 191 and 132 are the prices of good 1 and 2. The cost function for both products and any rm producing them is C (q) = l5q. (a) [8 marks] Are the two goods complements or substitutes? Briey explain why. What is the diversion ratio of this demand schedule and What does this number mean? (b) [10 marks] Suppose the two goods are produced by one rm. What are the optimal prices for the two goods? What is total prot for the rm? [Hintc Make sure the demand of each good enters the monopolist's prot function!] (e) [10 marks] Suppose rm 1 produces good 1 and rm 2 produces good 2. Assume that the two rms compete in prices. Derive the reaction function of each rm and give the Nash equilibrium prices and prots. Briey explain the dierence in total industry prots between your results in (b) and (c).