Mr. Starch is the mayor of a small farming town, Spudville, whose primary crop is potatoes.If the price of potatoes is P, then the townspeople will demand D(P)= 1200 – 100Ppotatoes per week for their own use. The number of potatoes that will be supplied per weekby the town's potato growers is S(P)= 100P.a. Find the equilibrium price of potatoes and the equilibrium quantity of potatoes thatwill be supplied.b. One day, Mr. Starch decides to tax his town in order to collect potatoes for his RoyalSpud Larder. The mayor required every person who consumed a potato to pay anadditional potato to the mayor as a tax. Thus, if a person wanted 5 potatoes forhimself, he would have to purchase 10 potatoes and give 5 to the mayor. When the price that is received by the sellers is ps, how much does it cost one of thetownspeople to get an extra potato for himself?c. When the price paid to suppliers is ps. how many potatoes will the townspeopledemand for their own consumption? (Hint: Express P, in terms of ps andsubstitute into the demand function.)d. Since the mayor consumes a potato for every potato consumed by the townspeople,the total amount demanded by the mayor and his town is twice the amountdemanded by the townspeople. Find the total number of potatoes demanded perweek by Mr. Starch and his townspeople when the price received by suppliers is ps.e. Solve for the equilibrium value of ps; the equilibrium total number of potatoesproduced, and the equilibrium total number of potatoes consumed by thetownspeople.f. The people of Spudville resented paying the extra potatoes to the mayor, andwhispers of revolution spread through the town. Worried by the hostile atmosphere,the mayor changed the potato tax. Now, the shopkeepers who sold the potatoeswould be responsible for paying the tax. For every potato sold to a customer, theshopkeeper would have to pay one potato to the mayor. Find the total number ofpotatoes that will be consumed by the townspeople in this scenario. How much arethe townspeople paying per potato? How much do the shopkeepers get to keep fromeach potato sale after paying their tax to the mayor?

Demand function for potatoes : D(p) =1200 - 100 P Supply function : S(P) = 100 P Equilibrium point…

Mr. Starch is the mayor of a small farming town, Spudville, whose primary crop is potatoes. If the price of potatoes is P, then the townspeople will demand D(P) = 1200 – 100P potatoes per week for their own use. The number of potatoes that will be supplied per week by the town's potato growers is S(P)= 100P. a. Find the equilibrium price of potatoes and the equilibrium quantity of potatoes that will be supplied. b. One day, Mr. Starch decides to tax his town in order to collect potatoes for his Royal Spud Larder. The mayor required every person who consumed a potato to pay an additional potato to the mayor as a tax. Thus, if a person wanted 5 potatoes for himself, he would have to purchase 10 potatoes and give 5 to the mayor. When the

Mr. Starch is the mayor of a small farming town, Spudville, whose primary crop is potatoes. If the price of potatoes is P, then the townspeople will demand D(P) = 1200 – 100P potatoes per week for their own use. The number of potatoes that will be supplied per week by the town's potato growers is S(P)= 100P. a. Find the equilibrium price of potatoes and the equilibrium quantity of potatoes that will be supplied. b. One day, Mr. Starch decides to tax his town in order to collect potatoes for his Royal Spud Larder. The mayor required every person who consumed a potato to pay an additional potato to the mayor as a tax. Thus, if a person wanted 5 potatoes for himself, he would have to purchase 10 potatoes and give 5 to the mayor. When the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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