Question: Assume the demand for beef is given by

Qd = 22 + 0.1 Y – 10Pb + 5 Pc

And the supply of beef is given by:

Qs = -400 + 500Pb – 200 Pf

where Qd denotes quantity of beef demanded, Qs denotes quantity supplied, Pb denotes price, of beef, Y denotes per capita income, Pc denotes the price of chicken, and Pf denotes the price of feed used for growing beef.

Assume further that:

Y = $10,000

Pc = $2.00

Pf = $1.00

a. What is the equilibrium price and quantity of beef?

b. What is the point price elasticity of demand for beef when its price is equal to $4.00, using the demand curve you derived to answer (a) above.

c. If the price of chicken increases to $3.00, what happens to the demand curve for beef? What is the equilibrium price and quantity of beef?

d. Compute the cross elasticity of demand and indicate whether beef and chicken are substitutes or complements.