The following represents demand for widgets: Qd = 680-9P + .006M - 4Pr, where P is the price of widgets, M is income, and Pr is the price of a related good, the widget. Supply of the widgets is determined by Qs = 30 + 3P.
a) Assume that in 2010 M=$15,000 and Pr=$20. Solve algebraically to determine the 2010 equilibrium price and quantity of widgets
b) Now assume two events occur: income drops to $13,000 and supply conditions change such that Qs=50 + 3P. Solve algebraically for the new equilibrium price and quantity of widgets after these two changes.