1. Assume there are markets for three goods (Q, denotes demand for good i, Q', denotes supply of good i) with interconnected demands and supply. Demand is given for every good by: Qa:=a – 2P P2 + 2P3,...

Extracted text: 1. Assume there are markets for three goods (Q, denotes demand for good i, Q', denotes supply of good i) with interconnected demands and supply. Demand is given for every good by: Qa:=a – 2P P2 + 2P3, 2 Qå :=30 – P2 Q:=100 – 2P3 + P1 + ÷P2. Supply is given for every good by: 1 1 Q: :=10 +P +P2 – P3, 2 1 Q :=2P, -P +P3, 1 1 Q :=5 + P3 + P P2. (a) Compute price elasticities ɛq P1 ; EQ%,P2; €Q%,P3; EQP3» EQ%.P3• Evaluate these elasticities at a point P = 1, P2 = ,, P3 = 1. What can (b) you say about the sign and magnitude of them (elastic/inelastic). (c) of equilibrium conditions in the form AP = d, specify A, P, d. Write down equilibrium conditions for every market. Express the system (d) a for all prices to be non-negative? Find equilibrium prices Pf, P, P. What are conditions on parameter