Annual demand and supply for the fitness tracker market (e.g. Fitbit, Jawbone, etc.) is given by:
Q D = 5,000 + 0.5 I + 0.2 A - 100P, and QS = -5000 + 100P
where Q is the quantity per year, P is price, I is income per household, and A is industry advertising expenditure.
a. If A = $10,000 and I = $25,000, what is the demand curve for fitness trackers?
b. Given the demand curve from part (a), what is equilibrium price and quantity?
c. If consumer incomes increase to $30,000, what will be the impact on equilibrium price and quantity?