Problem: The general demand and supply functions for good A are estimated to be, respectively:
Qd = 52.50 - 2.0P + 0.015M + 7.0PR
Qs = -500.0 + 8.0P
Where: Qd is quantity demanded per month, Qs is quantity supplied per month, P is price of good A,M is average household income, and PR is the price of a related good R. Assume the following values of the variables: M = $42,500, and PR = $30.
a. What is the maximum price at which 500 units of good A can be sold?
b. What is minimum price producers will accept to supply 500 units of good A?
c. If the market price is $150, what follows in the market for this product?