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(a) What are the general equilibrium prices of coffee and tea initially? (b) What are the general equilibrium prices after a frost damages the coffee crop?

(a) What are the general equilibrium prices of coffee and tea initially? (b) What are the general equilibrium prices after a frost damages the coffee crop?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. The following table shows the equations of some demand and supply curves for coffee and tea. Coffee Tea Initial Demand Curve Q 120 50Pc + 40PT Q=80-75PT + 20Pc = Initial Supply Curve Q& = 80 + 20Pc Q = 45+ 10PT Supply Curve after Frost Q& = 40 + 20Pc = 45+ 10PT Qf (a) What are the general equilibrium prices of coffee and tea initially? (b) What are the general equilibrium prices after a frost damages the coffee crop? 2. Matt has preferences for coffee (x) and pizza (y). His utility function is described by U(x, y) = √xy. Suppose that the price of x is på and the price of y is Py Matt has an income of m. (a) Derive the demand curves for x ad y in terms of px, Py, m. (b) Now assume that Matt has $100 of income, pz = $10 and py = $2. What is Matt's optimal bundle? (c) Draw Matt's budget constraint and mark his optimal bundle. Draw the indifference curve and calculate the utility he receives from this bundle.
Transcribed Image Text:1. The following table shows the equations of some demand and supply curves for coffee and tea. Coffee Tea Initial Demand Curve Q 120 50Pc + 40PT Q=80-75PT + 20Pc = Initial Supply Curve Q& = 80 + 20Pc Q = 45+ 10PT Supply Curve after Frost Q& = 40 + 20Pc = 45+ 10PT Qf (a) What are the general equilibrium prices of coffee and tea initially? (b) What are the general equilibrium prices after a frost damages the coffee crop? 2. Matt has preferences for coffee (x) and pizza (y). His utility function is described by U(x, y) = √xy. Suppose that the price of x is på and the price of y is Py Matt has an income of m. (a) Derive the demand curves for x ad y in terms of px, Py, m. (b) Now assume that Matt has $100 of income, pz = $10 and py = $2. What is Matt's optimal bundle? (c) Draw Matt's budget constraint and mark his optimal bundle. Draw the indifference curve and calculate the utility he receives from this bundle.
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