1. Suppose that the initial demand and supply curves for coffee are illustrate by D¹ and S¹ in the graphbelow. Assume that coffee and kringle, a Danish pastry for which Racine is well-known (O&H Bakerymakes the best, imho) are complements in consumption. Clearly label all additions to the graph.a) Suppose that the initial market price of coffee, Po, is $4 per cup (Po = $4). Determine and illustratethe quantity demanded at Po (labeled as Qod), and the quantity supplied at Po (labeled as Qo³). ShowQod and Qos on the quantity axis. Is the market in equilibrium at Po = $4? If not, state whether asurplus or shortage exists at Po, calculate its magnitude, and illustrate it graphically. Illustrate andexplain the market equilibrium quantity and price, denoted Q₁* and P₁*, and label the marketequilibrium as point E¹. (7 pts)b) Next, suppose that the price of kringle increases. In the same graph, illustrate the resulting newmarket equilibrium quantity and price for coffee, Q* and P2*, and label it as point E². Brieflyexplain the adjustment process to the new equilibrium. (6 pts)Price, Pt$5Coffee Marketо$4$3$2$1-S1D1020406080100120140 Quantity, Q

Answered: Image /qna-images/answer/16ff4d88-9eaf-4271-88b2-83bfa22dca8b.jpg

Answered: 1. Suppose that the initial demand and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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8. Consider a general equilibrium model with two commodities. The excess demand functions for the two commodities are: E1 (2P₁)¹ (P₁+2P₂) - 1 E2 == (2P2)¹ (P₁+2P₂) - 2 (a) Is Walras' law satisfied? (b) Are the goods substitutes or complements?
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Discuss four (4) factors that affect an individual demand curve.
ECON302 TPS2: Demand Suppose that Graham enjoys painting green people. He has very particular preferences and must have exactly 3 gallons of yellow paint for each 2 gallons of blue paint. Let Y be the number of gallons of yellow paint and B be the number of gallons of blue paint. Also, let PÅ be the price of blue paint. Suppose Graham has $20 to spend on paint. Also, the price of yellow paint is Py = $1 per gallon. a) Graph Graham's price consumption curve for the prices PB = $1, and PB = 2, PB = $4. Please put the number of gallons of B on the vertical axis and the number of gallons of Y on the horizontal axis. Be sure to label your graph carefully and accurately.

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