Answered: Information on a coffee market is given…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Information on a coffee market is given as below:

q^s=20p-100

q^d=6000/p

where p is the price of coffee per tin and q is the quantity of coffee in tins.

(a) Draw two functions on a diagram restricting your attention to p E[0, ∞) and q E [0, ∞).

(b) Obtain the market equilibrium. What occurs if the price of coffee per tin is $15?

(c) Suppose the demand function has changed to q ^D = 3000/p . Provide an economic explanation of this change and list a few reasons as to why it might have occurred.

(d) Obtain the new market equilibrium. What would happen if the price of coffee per tin stayed the same as the equilibrium price you obtained in (b)?

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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