1.2. Suppose the market demand equation for Cold Stone Creamery's Ice-cream (CS) in UAE is given by: 3D 2000 — 40ОРCS + 0.51 + 150РBR while the UAE market supply equation for Cold Stone Creamery's Ice-cream is given by: = -516 + 300P cs – 60W where Qcs is quantity of text-books, Pcs is the price of Cold Stone Creamery's Ice-cream, I is household income, W is wage rate paid to Cold Stone Creamery's workers, and PBR the price of Baskin-Robbins's Ice-cream. Assume that: I = AED2,000; W = AED20; РBR = AED2. a. Calculate the equilibrium price and quantity in this market. b. What is the Price elasticity of demand for Cold Stone Creamery's Ice-cream at the equilibrium price and quantity? Hint: Use your answer in "a". c. Is demand for Cold Stone Creamery's Ice-cream elastic or inelastic? Why? Hint: Use your answer in “b". d. Given your answer in part c and the aim is to maximize profit, would you recommend Cold Stone Creamery to increase its price? Why? e. Are Cold Stone Creamery's Ice-cream and Baskin-Robbins's Ice-cream substitutes or complements? Why? Hint: Use the demand equation (QEs) to provide your answer.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Question
1.2.
Suppose the market demand equation for Cold Stone Creamery's Ice-cream (CS) in UAE
is given by:
Qés = 2000 – 400Pcs + 0. 51+ 150P BR
while the UAE market supply equation for Cold Stone Creamery's Ice-cream is given by:
Qès = -516 + 300PCS
60W
where Qcs is quantity of text-books, Pcs is the price of Cold Stone Creamery's Ice-cream, I is
household income, W is wage rate paid to Cold Stone Creamery's workers, and PBR the price
of Baskin-Robbins's Ice-cream.
Assume that: I = AED2,000; W = AED20; PBR = AED2.
Calculate the equilibrium price and quantity in this market.
а.
b. What is the Price elasticity of demand for Cold Stone Creamery's Ice-cream at the
equilibrium price and quantity? Hint: Use your answer in "a".
c. Is demand for Cold Stone Creamery's Ice-cream elastic or inelastic? Why? Hint: Use your
answer in "b".
d. Given your answer in part c and the aim is to maximize profit, would you recommend Cold
Stone Creamery to increase its price? Why?
e. Are Cold Stone Creamery's Ice-cream and Baskin-Robbins's Ice-cream substitutes or
complements? Why? Hint: Use the demand equation (QEs) to provide your answer.
Transcribed Image Text:1.2. Suppose the market demand equation for Cold Stone Creamery's Ice-cream (CS) in UAE is given by: Qés = 2000 – 400Pcs + 0. 51+ 150P BR while the UAE market supply equation for Cold Stone Creamery's Ice-cream is given by: Qès = -516 + 300PCS 60W where Qcs is quantity of text-books, Pcs is the price of Cold Stone Creamery's Ice-cream, I is household income, W is wage rate paid to Cold Stone Creamery's workers, and PBR the price of Baskin-Robbins's Ice-cream. Assume that: I = AED2,000; W = AED20; PBR = AED2. Calculate the equilibrium price and quantity in this market. а. b. What is the Price elasticity of demand for Cold Stone Creamery's Ice-cream at the equilibrium price and quantity? Hint: Use your answer in "a". c. Is demand for Cold Stone Creamery's Ice-cream elastic or inelastic? Why? Hint: Use your answer in "b". d. Given your answer in part c and the aim is to maximize profit, would you recommend Cold Stone Creamery to increase its price? Why? e. Are Cold Stone Creamery's Ice-cream and Baskin-Robbins's Ice-cream substitutes or complements? Why? Hint: Use the demand equation (QEs) to provide your answer.
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