= = SECTION A I 1. Consider a simple model in which two commodities, i = 1,2, are related to each other. The following e

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Section A I 1 Consider A Simple Model In Which Two Commodities I 1 2 Are Related To Each Other The Following E 1 (61.97 KiB) Viewed 21 times

= = SECTION A I 1. Consider a simple model in which two commodities, i = 1,2, are related to each other. The following equations define the corresponding demand/supply functions: Qd = a. + a_P1 + a2P2; Q f = bo + b P1 + b P2 Q = &o + a Pi + a2P2; Q2 = Bo + Bi Pi + B2P2 where Q defines quantity demanded for commodity i, li quantity supplied, Pi its price, and the remaining coefficients define exogenously given parameters. Assuming that both markets clear, i.e., general market equilibrium, then: (a) By eliminating quantities using the market clearing condition that excess demand is equal to zero, i.e., E = Q? - Qi = 0 and E = Q - QA = 0, express the system of the remaining equations in matrix form and define each matrix. (4 marks) = (b) Describe the condition(s) needed in order for this system to have a unique non-trivial solution. (2 marks)