Assume that the equation for demand for bread at a small bakery is Qd = 60 - 10Pb + 3Y, where Qd is the quantity of bread demanded in loaves, Pb is the price of bread in dollars per loaf, and Y is the average income in the town in thousands of dollars. Assume also that the equation for supply of bread is Qs = 30 + 20Pb - 30 Pf, where Qs is the quantity supplied and Pf is the price of flour in dollars per pound. Assume finally that markets clear, so that Qd = Qs.
a. If Y is 10 and Pf is $1, solve mathematically for equilibrium Quantity and equilibrium Pb.
b. If the average income in the town increases to 15, solve for the new equilibrium Quantity and equilibrium Pb.