Question

1) Pencils and erasers are complement goods, and pencils and pens are substitute goods. An increase in the price of erasers ______ the number of pencils consumers want to buy. An increase in the price of pens ______ the number of pencils consumers want to buy.

2) Demand is Q^D = 7 - (1/4)P and Supply is Q^S = -3 + P. The market equilibrium price is P = $ _____ and quantity is Q = _____. Fill in the blank, read surrounding text. units.

3) There are two markets: one for tomatoes and one for cucumbers:
- in the tomato market, a 3% increase in price causes quantity demanded to reduce by 4%.
- in the cucumber market, a 3% increase in price causes quantity demanded to reduce by 2%.

The price elasticity of demand in the tomato and cucumber markets are ______ and ______ respectively.

Answer 1