Demand for lamb is given by the equation:
Qd = 217.1 – 0.112
PL + 0.125
PB – 0.198
Y
Pb=10
Y=50K
where:
• Qd is the quantity of lamb sold in grams per person per week.
• PL is the price of lamb (in dollars per lbs, at 1995 prices).
• PB is the price of beef (in dollars per lbs, at 1995 prices).
• Y is annual personal disposable income per capita (1000$, at 1995
prices).
1. (10 points) What are the equilibrium quantity and price of lamb in the market, if
the supply equation for lamb is:
Qs = 7 + 10 PL ,
Pb=10
Y=50K
2. (10 points) What would happen to the demand for lamb if the price of lamb went
up by $2 per lbs (at 1995 prices). Please use concepts of elasticity to explain.