Consider the market for an Italian cookbook. Demand for the Italian cookbook is equal to QD = 3500 – 50P1 – 200P2 Where P1 = price of the Italian cookbook and P2 = price of bottled olive oil The supply of the Italian cookbook is equal to QS = 150P1 - 500.
(a) If P2 = $5, calculate the equilibrium price and quantity of Italian cookbooks.
(b) If P2 = $5, derive the inverse demand curve.
(c) Derive the inverse supply curve.
(d) If P2 = $5, calculate the elasticity of demand (ED) and the elasticity of supply (ES) at equilibrium using calculus.
(e) Is the demand for Italian cookbooks elastic, unit-elastic, or inelastic? Briefly explain. [2 Points] (f) Is the supply for Italian cookbooks elastic, unit-elastic, or inelastic? Briefly explain.
(g) At the equilibrium point, calculate the cross-price elasticity of demand for Italian cookbooks with respect to the price of olive oil using calculus.
(h) Are Italian cookbooks and olive oil substitutes or complements? Briefly explain.