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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Suppose that Felix and Janet represent the only two consumers of jeans in some hypothetical market. The following table presents their annual demand schedules for jeans: Price (Dollars per pair) 10 20 60 50 On the following graph, plot Felix's demand for jeans using the green points (triangle symbol). Next, plot Janet's demand for jeans using the purple points (diamond symbol). Finally, plot the market demand for jeans using the blue points (circle symbol). Note: Line segments will automatically connect the points. Remember to plot from left to right. PRICE (Dolars per pair) 8 40 20 10 D 30 40 50 0 16 Felix's Quantity Demanded Janet's Quantity Demanded (Pairs) (Pairs) 32 48 20 32 12 24 4 16 8 32 0 48 64 QUANTITY (Pairs) 80 96 4 Felix's Demand > Janet's Demand Market Demand
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Suppose the market demand for a cup of cappuccino is given by Qp = 24-4P and the market supply for a cup of cappuccino is given by Qs = 8P - 12, where P = price (per cup). Graph the supply and demand schedules for cappuccino. 1.) Using the line drawing tool, draw the demand curve for cappuccino. Label your line 'D'. 2.) Using the line drawing tool, draw the supply curve for cappuccino. Label your line 'S'. 3.) Using the point drawing tool, plot the equilibrium price and quantity. Label your point 'E'. Carefully follow the instructions above and only draw the required objects. Price per cup ($) 10.50- 웅 9.00- 7.50 6.00 4.50 3.00+ 1.50- 3 Market for Cappuccino 6 9 12 15 Cups of cappuccino 18 21 24
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Please refer to the following information to answer the question (in bold) below: You enjoy consuming apples (A) and oranges (O). Suppose that your utility function over both goods is given by Your marginal utility function for apples is . Your marginal utility function for oranges is U (A, O) = AO³ MUA = 0³ MUO 3A0² . Currently, the price of apples is $10/peck, the price of oranges is $5/pound, and your income is $160. Assume that apples are your horizontal axis good and oranges are your vertical axis good. = When you set up the optimal decision rule for your consumer problem, which of the following statements best describes how much you will buy of apples and oranges at your consumer equilibrium? For each peck of apples, you will buy 1/3 pounds of oranges. For each peck of apples, you will buy 1 pounds of oranges. O For each peck of apples, you will buy 3 pounds of oranges. O For each peck of apples, you will buy 6 pounds of oranges.
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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True/False? Briefly explain. Assume good x is a normal good. In terms of consumer behavior, a cash grant and a small (relative to the initial consumption of x) limited non-matching grant on good x (with the limit that is equal to the cash grant) are essentially equivalent.

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