The supply and demand for wheat are given by
QS= 20 + 100p
QD = 4000 - 100p +10Y
Where Y is the average consumer income.
a. Compute the partial derivative of quantity demand with respect to changes in average consumer income.
b. Solve for the equilibrium price and quantity as functions of the consumer income.
c. Compute the derivatives of the equilibrium price and quantity with respect to income.
a. 10
b. 200p = 3980 + 10Y
p*(Y) = 19.9 + 0.05Y
Q*(Y) = 2010 + 5Y
c. dp*/dY = 1/20
dQ*/dY = 5
Both are positive, indicating the equilibrium price and quantity rises with income.
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