Essay
The local lemon market has the following supply and demand relationships:
QD = 100 - 5p - po + 2I
QS = 4p
where p is the price of lemons (per pound),Q is the quantity of lemons in pounds,I is the average consumer income,and po is the price per pound of oranges.Derive the equilibrium price and quantity of lemons as functions of the price of oranges and average consumer income.Use the calculus method of comparative statics to compute the effects of income and the price of oranges on the equilibrium price and quantity of lemons.
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