**Market Analysis of Tea and Coffee**1. **Market Description** Suppose that the market for tea is described by the following demand and supply functions: - Demand for Tea ($D_t$): $D_t = 100 - 5P_t + 3P_c$ - Supply for Tea ($S_t$): $S_t = -10 + 2P_t$ And the market for coffee is described by: - Demand for Coffee ($D_c$): $D_c = 120 - 8P_c + 2P_t$ - Supply for Coffee ($S_c$): $S_c = -20 + 5P_c$ Where: - $P_t$ is the price of tea. - $P_c$ is the price of coffee.2. **Tasks** a) Determine whether tea and coffee are substitutes or complements. b) Reduce the system of equations in each market to a single equation by eliminating the quantity variable. c) Express the two equations obtained in part (a) in matrix form, where the first variable vector is $P_t$.

Demand function is what describes a relationship between one variable and its determinants. It…

ppose that the market for tea is desaribed by demand and supply functions De = 100-5Pe+ 3Pe St= -10+ 2Pe nd Market for Coffee: De= 120-8Pe +2 Po Sez-20+5 Pc Pe is price for tea. a). Are tea and coffee substitutes of complements b) Reduce the equation system in each market to one. PAuntion bu elimotina the ouontitu variable Pe is price for coffee. etc.

ppose that the market for tea is desaribed by demand and supply functions De = 100-5Pe+ 3Pe St= -10+ 2Pe nd Market for Coffee: De= 120-8Pe +2 Po Sez-20+5 Pc Pe is price for tea. a). Are tea and coffee substitutes of complements b) Reduce the equation system in each market to one. PAuntion bu elimotina the ouontitu variable Pe is price for coffee. etc.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

**Market Analysis of Tea and Coffee**

1. **Market Description**

Suppose that the market for tea is described by the following demand and supply functions:

- Demand for Tea ($D_t$): $D_t = 100 - 5P_t + 3P_c$
- Supply for Tea ($S_t$): $S_t = -10 + 2P_t$

And the market for coffee is described by:

- Demand for Coffee ($D_c$): $D_c = 120 - 8P_c + 2P_t$
- Supply for Coffee ($S_c$): $S_c = -20 + 5P_c$

Where:
- $P_t$ is the price of tea.
- $P_c$ is the price of coffee.

2. **Tasks**

a) Determine whether tea and coffee are substitutes or complements.

b) Reduce the system of equations in each market to a single equation by eliminating the quantity variable.

c) Express the two equations obtained in part (a) in matrix form, where the first variable vector is $P_t$.

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