Answer to Question #312432 in Microeconomics for Dennis

Question

•Given the following set of simultaneous equations for two related goods,xandy, find the equilibrium conditions for each market if the consumers’ income isi=600. What types of goods arexandy?

•Q_dx= 22-3P_x+P_y+ 0.1i

• Q_sx=-5+15P_x

•

•Q_dy=32+2P_x-4P_y+0.1i

•Q_sy=-6+32P_y

Answer 1

Solution

I = 600×0.1=60

Q_dx=82-3p_x+p_y

Q_sx=-5+15p_x

Q_d=Q_s

=18p_x-p_y=87 (equation 1)

92+2p_x-4p_y=-6+32p_y

=-2p_x+36p_y=98 (Equation 2)

Using equation 1 solve for p_y

P_y=18p_x-87

Substitute equation 2

-2p_x+36(18p_x-87)=98

646p_x=3230

P_x=5. P_y=3

Q_dx=70. Q_dy=90

The two goods are substitutes

The coefficient of p_y is positive. Therefore if the price of good y goes up, the quantity demand for good x increases.