Suppose that the (inverse) demand equation for organic tea is P = 230 - 4Qd and the (inverse) supply curve for organic tea is P = 0.6Qs in a local market. Quantities are measured in pounds per week, and
Suppose recent regulations for organic tea production, established by the Food and Drug Administration, increase the costs for producers of organic tea. Under these regulations, the new (inverse) supply curve for tea is as follows: P = 16 + 0.6Qs. Find the new
Sketch a supply-and-demand graph to illustrate the market before and after the regulation goes into effect. In this example, has supply increased or decreased? Are the directions of change in price and quantity that you found from your computations consistent with this supply increase or decrease?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
