Suppose the demand curves for Cookies and Apples in the city of Mendota are given by: Cookies: P = 110 – Q + I Apples: P = 100 – 0.5Q – 0.5I

where P is dollar price, Q is quantity in units and I is income expressed in thousands of dollars. Let the price of cookies and apples remain constant at $10 per unit for both goods.

(a) Suppose the income in the city of Mendota is $100,000 (I = 100), what is the quantity demanded for cookies and apples?

(b) Suppose the income in the city of Mendota increases to $150,000 (I = 150), what is the quantity demanded for cookies and apples?

(c) What is the income elasticity of demand for both goods when income increases from $100,000 (I = 100) to $150,000 (I = 150)? For each good, what can be concluded in terms of sensitivity to changes in income?

(d) Suppose the income in the city of Mendota is $100,000 (I = 100), does the price of $10 per unit in each good maximize the revenue? If not, propose the price and quantity for each good that maximizes the revenue.