The general supply function for the product X calculated to be Qs = -200 + 20P - 5PI + 0.5PR
Where the P is price of good X, Qs is quantity supplied of good X, PR is price of related good R and PI is the price of inputs to good X.
1. Explain the relationship between good X and good R? Explain, based on the supply function above.
2. Obtain the equation for the supply function if the input prices are $10, and the price of R is $20.
3. Determine the minimum price at which the producer will supply any of the good X at all?
4. Calculate the equilibrium price and quantity of good X.
5. Calculate the market outcome if price is $40? What do you expect to happen in the market? Why?