To modify the problems into the tourism industry, we need to redefine the variables and interpret them

within the context of tourism. Let's make the following modifications:

Original demand function:

Qd = 60 - 2Px + 0.01M + 7Pr

Modified demand function for tourism:

Qd = 60 - 2Px + 0.01I + 7Pp

where:

Qd is the quantity demanded of tourism services.

Px is the price of tourism services.

I represents the income of potential tourists.

Pp represents the price of related tourism products.

a) Suppose I = $40,000 and Pp = $20, what is the direct demand function for tourism services?

The direct demand function for tourism services can be obtained by substituting the given values:

Qd = 60 - 2Px + 0.01(40,000) + 7(20)

Qd = 60 - 2Px + 400 + 140

Qd = 600 - 2Px

Therefore, the direct demand function for tourism services is Qd = 600 - 2Px.

b) Suppose the supply function for tourism services is given by Qs = -600 + 10Px. What are the
equilibrium price and quantity demanded and supplied?
To find the equilibrium price and quantity, we need to set the demand and supply functions equal to
each other and solve for Px:

Qd = Qs

600 - 2Px = -600 + 10Px

Rearranging the equation:

12Px = 1200

Px = 100

Substituting the value of Px back into either the demand or supply function:

Qd = 600 - 2(100)

Qd = 400

Therefore, the equilibrium price is $100, the equilibrium quantity demanded is 400 units of tourism
services, and the equilibrium quantity supplied is also 400 units.

c) What happens to the equilibrium price, quantity demanded, and quantity supplied if other things
remain the same as in part (b), but income increases to $52,000?

To determine the impact of the change in income on the equilibrium price and quantity, we need to
update the demand function with the new income value:

Qd = 600 - 2Px + 0.01(52,000) + 7(20)

Qd = 600 - 2Px + 520 + 140

Qd = 1260 - 2Px
Setting the updated demand function equal to the supply function:

Qd = Qs

1260 - 2Px = -600 + 10Px

Rearranging the equation:

12Px = 1860

Px = 155

Substituting the value of Px back into either the demand or supply function:

Qd = 1260 - 2(155)

Qd = 950

Therefore, with an income increase to $52,000, the new equilibrium price is $155, the equilibrium
quantity demanded is 950 units of tourism services, and the equilibrium quantity supplied remains at
400 units.

d) What happens to the equilibrium price, quantity demanded, and quantity supplied if other things
remain the same as in part (b), but the price of the related good decreases to $14?

Substituting the new value of the price of the related good into the demand function:

Qd = 600 - 2Px + 0.01(40,000) + 7(14)

Qd = 600 - 2Px + 400 + 98

Qd = 1098 - 2Px
Setting the updated demand function equal to the supply function:

Qd = Qs

109

8 - 2Px = -600 + 10Px

Rearranging the equation:

12Px = 1698

Px = 141.5

Substituting the value of Px back into either the demand or supply function:

Qd = 1098 - 2(141.5)

Qd = 815

Therefore, with a decrease in the price of the related good to $14, the new equilibrium price is $141.5,
the equilibrium quantity demanded is 815 units of tourism services, and the equilibrium quantity
supplied remains at 400 units.

e) What happens to the equilibrium price, quantity demanded, and quantity supplied if other things
remain the same, income and price of related goods are at their original levels, and supply shifts to Qs =
-360 + 10Px?

To determine the impact of the supply shift, we need to set the updated supply function equal to the
original demand function:

Qd = Qs
60 - 2Px + 0.01(40,000) + 7(20) = -360 + 10Px

Simplifying the equation:

0.01(40,000) + 7(20) = 10Px + 2Px - 60 + 360

400 + 140 = 12Px + 300

540 = 12Px

Px = 45

Substituting the value of Px back into either the demand or supply function:

Qd = 60 - 2(45) + 0.01(40,000) + 7(20)

Qd = 60 - 90 + 400 + 140

Qd = 510

Therefore, with the supply shift to Qs = -360 + 10Px, the new equilibrium price is $45, the equilibrium
quantity demanded is 510 units of tourism services, and the equilibrium quantity supplied is also 510
units.