Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 22, Problem 11CQ
To determine
The effects of drought in a perfect competitive market.
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Market Equilibrium. Eye-de-ho Potatoes is a product of the Coeur d'Alene Growers' Association. Producers in the area are able to switch back and forth between potato and wheat production, depending on market conditions. Similarly, consumers tend to regard potatoes and wheat (bread and bakery products) as substitutes. As a result, the demand and supply of Eye-de-ho Potatoes are highly sensitive to changes in both potato and wheat prices. Demand and supply functions for Eye-de-ho Potatoes are as follows
QD = - 1,450 - 25P + 12.5PW + 0.1Y (Demand)
QS = - 100 + 75P - 25PW - 12.5PL + 10R (Supply)
where P is the average wholesale price of Eye-de-ho Potatoes ($ per bushel), PW is the average wholesale price of wheat ($ per bushel), Y is income (GDP in $ billions), PL is the average price of unskilled labor ($ per hour), and R is the average annual rainfall (in inches). Both QD and QSare in millions of bushels of potatoes.
A. When quantity is expressed as a function of price, what are the…
A retail chain will buy
900
cordless phones if the price is
$30
each and
800
if the price is
$40.
A wholesaler will supply
350
phones at
$40
each and
1400
at
$70
each. Assuming that the supply and demand functions are linear, find the market equilibrium point and explain what it means.
You are the Economic Consultant for Zuku Farms Ghana Limited. Zuku produces cowpea in a community where producers are able to switch back and forth between cowpea and groundnut depending on market conditions. Consequently, you were tasked by the management of Zuku and you estimated the demand function for cowpea as follows: where is the quantity of cowpea demanded in bags per month, is the average price of cowpea in Ghana Cedis, is the average price of groundnut in Ghana Cedis, and Y is the income of consumers. Assuming is initially GH¢31.00 per bag, Y is GH¢1001.50. Also that your estimated supply function for cowpea is as follows: QS = -25 + 3.5PC -1.5Pf – 0.5Pg + 0.25R
Where Qs is the quantity supplied of cowpea in bags, Pc and Pg are as defined above, Pf is the price of fertilizer per bag, R is the amount of rainfall (in inches).
If Pf = GH¢10, R= 40 inches and Pg= GH¢31.00
Find the resulting supply function for cowpea and determine the equilibrium price and quantity.…
Chapter 22 Solutions
Economics: Private and Public Choice (MindTap Course List)
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