The vertical axis on both plots is USD. The demand for product $1$ is given by a$1$b$1$p$1$bp$2$ and the

demand for product $2$ is given by a$2$ b$2$p$2$ bp$1$ just as discussed in class. Note that the price elasticity

in a market with demand of the form $$ p $...$ increases as increases $($a proof is included in the

end of this homework, for sake of completeness$).$

The first plot is obtained for $($a$1,$ a$2,$ b$1,$ b$2,$ b$)=(100,100,2\mathrm{.}1,2\mathrm{.}1+$ x$,2)$ where x is represented in

the horizontal axis. The second plot is obtained for $($a$1,$ a$2,$ b$1,$ b$2,$ b$)=(100,100,6\mathrm{.}1,5\mathrm{.}1,$ z$)$ where zis

represented in the horizontal axis

For the first plot explain:

a$)$ which curve represents p$1($x$)$ and which curve represents p$2($x$)$

b$)$ why do these curves intersect at x $=0$

c$)$ why do these curves diverge from each other as x increases

For the second plot explain

which curve represents p$1($z$)$ and which curve represents p$2($z$)$

e$)$ why one curve is above the other at z $=0$

f$)$ why the difference between these curves increases as z increase