Suppose in a two commodity market model the supply and demand functions are
given as:
QS1 = -3 +4P1 QS2 = -18 + 4P2
Qd1 = 4 – P1 + 1/2 P2 Qd2 = 10 + P1 – P2
Required:
a) Explain the relationship between the two commodities giving valid economic
reasons. (6 marks)
b) Using the functions provided, calculate the equilibrium values of prices and
quantities. (6 marks)
c)
d) Discuss some of the factors that may cause a shift of the supply curve.
(8 marks)