Economics Assignment – Linear Equations Questions

Show all work and show all calculations.1. Suppose the relationship between Demand for good x (Qx) can be described by the followinglinear relationship (Py: price of good y, I = income):Qx= 300 – 10Px ? 6Py + 2 Ia) From the demand relationship above, you conclude: Goods X and Y aresubstitute/complementary goods because_______________________, and an increase in Pywould cause the increase in quantity demanded/increase in demand for X. Show this on a graphbelow.b) From the demand relationship above, Good X is a normal/inferior good becausec) Suppose Py = $15 per unit, and I = $100, and Px = $10. At these prices and income, the priceelasticity of demand is equal to _______ and the cross price elasticity of demand is equal to_______. Interpret these numbers.d) From the computations in part c), you can say that demand for good X is elastic/inelastic. Howwould a decrease in price of X affect expenditure (revenue) on good X, other things constant.2. Suppose the demand and supply curves for basketballs are given by:Qd = 200 – 5PQs = ?20 + 6P.a) Using the demand and supply functions above, the equilibrium price of a basketball is ____, andthe equilibrium quantity is ____. Illustrate your answer.b) Compute price elasticity of demand and supply at the equilibrium price and quantity. Priceelasticity of demand is equal to___ _ and price elasticity supply is equal to ____.c) On the same graph above, show the effect on equilibrium price and quantity of a) an increase inthe price of rubber used to make basketballs, and b) changing preferences of kids to playingmore soccer.d) From the demand and supply curves given above, compute CS, PS, and aggregate surplus.Illustrate on Graph.e) Government wants to increase its revenues. Legislators decide that they will impose an excisetax of $3 per basketball on producers of basketball. Using the demand and supply curves above,the new equilibrium price and quantity of Pizza’s would be _____, ______. The producers willreceive a net of tax price of ____. The government will collect total tax revenue of ______.Illustrate your answer.f) Define, in words, deadweight loss, and briefly explain why the excise tax causes a dead weightloss. Compute deadweight loss (DWL). Illustrate DWL in the graph above.