Answer to Question #164759 in Microeconomics for SYEDA ZAINAB

Question

Q: Suppose there are three types of Apples A, B, and C being sold and consumed. The demand and supply equations for each type are:

D_A= 20 - 2P_A + 4P_B + P_C , S_A= 4P_A - 5

D_B=10+3P_A - 5P_B + 2P_C , S_B=3P_B - 7

D_C = 70+4P_A +2P_B - 5P_C , S_C=5P_C - 16

• Determine equilibrium prices and quantities.
• Calculate the elasticity of demand for B with respect to prices of variety A, B and C and interpret the economic meaning of the results

Answer 1

$$-6p_A+4p_B+p_c=-25$$

$$3p_A-8p_B+2p_C=-17$$

$$4p_A+2p_B-10p_c=-86$$

$$p_A=15$$

$$p_B=12$$

$$p_C=17$$

$$q_A=55$$

$$q_B=29$$

$$q_C=69$$

$$E_B=-5\times\frac{12}{29}=-2.07$$