The general supply function for the product X estimated to be Qs = -200 + 20P - 5PI + 0.5PR
Where Qs is quantity supplied of good X, P is price of good X, PI is the price of inputs to good X, and PR is price of related (in production) good R.
e. Based on the supply function above, what is the relationship between good X and good R? Explain.
f. Derive the equation for the supply function if the input prices are $10, and the price of R is $20.
g. What is the minimum price at which the producer will supply any of the good X at all?
h. Based on your results above, determine the equilibrium price and quantity of good X.
i. What is the market outcome if price is $40? What do you expect to happen in the market? Why?