Suppose the demand curve for a product is given by Qd = 300 - 2P + 4I, where I is average income measured in thousands of dollars. The supply curve is Qs = 3P - 50.
a. If I=25, find the market-clearing price and quantity for the product.
b. Find the own price elasticity of demand at the equilibrium price and quantity.
c. What is the interpretation of the value of the coefficient of elasticity computed in part "b"?
d. Find the income elasticity of demand at the equilibrium price and quantity.
e. What is the interpretation of the value of income elasticity computed in part "d"?
f. Find the price elasticity of supply at the equilibrium price and quantity.
g. What is the interpretation of the value of price elasticity computed in part "f"?