Q: The estimated supply functions for avocados is: Qs 100 p 80 - 0.25 pf where Qs is quantity supplied (in thousand kilograms) - p is the price of avocado per kg in US dollar - pf is the price of fertilizer per kg in US dollar and is $80 per kg. Suppose that selling price of avocado per kg is $5 a) Calculate the impact of unit change in price on quantity supplied. Explain your result. Pay attention to unit in your explanation. b) Suppose kg price of avocados goes up by $3. How much the quantity supplied would increase? Show it on a supply diagram and explain your result. c) Now suppose kg price of avocados decreases by $2. How much the quantity supplied would decrease? Show it on a supply diagram and explain your result. d) Calculate the necessary change in price (slope of supply curve) that we should have for a unit change in quantity supplied. Explain your result. e) Using the formula for the slope of the supply curve, calculate how much price should change if we want to increase the quantity supplied by 5 thousand kg. Explain your result. f) Using the formula for the slope of the supply curve, calculate how much price should change if we want to lower the quantity supplied by 8000 kg. Explain your result.
Q: The estimated supply functions for avocados is: Qs 100 p 80 - 0.25 pf where Qs is quantity supplied (in thousand kilograms) - p is the price of avocado per kg in US dollar - pf is the price of fertilizer per kg in US dollar and is $80 per kg. Suppose that selling price of avocado per kg is $5 a) Calculate the impact of unit change in price on quantity supplied. Explain your result. Pay attention to unit in your explanation. b) Suppose kg price of avocados goes up by $3. How much the quantity supplied would increase? Show it on a supply diagram and explain your result. c) Now suppose kg price of avocados decreases by $2. How much the quantity supplied would decrease? Show it on a supply diagram and explain your result. d) Calculate the necessary change in price (slope of supply curve) that we should have for a unit change in quantity supplied. Explain your result. e) Using the formula for the slope of the supply curve, calculate how much price should change if we want to increase the quantity supplied by 5 thousand kg. Explain your result. f) Using the formula for the slope of the supply curve, calculate how much price should change if we want to lower the quantity supplied by 8000 kg. Explain your result.
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...
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Transcribed Image Text:Q: The estimated supply functions for avocados is:
Qs 100 p 80 - 0.25 pf where
Qs is quantity supplied (in thousand kilograms)
- p is the price of avocado per kg in US dollar
- pf is the price of fertilizer per kg in US dollar and is $80 per kg.
Suppose that selling price of avocado per kg is $5
a) Calculate the impact of unit change in price on quantity supplied. Explain your result. Pay attention to
unit in your explanation.
b) Suppose kg price of avocados goes up by $3. How much the quantity supplied would increase? Show it
on a supply diagram and explain your result.
c) Now suppose kg price of avocados decreases by $2. How much the quantity supplied would decrease?
Show it on a supply diagram and explain your result.
d) Calculate the necessary change in price (slope of supply curve) that we should have for a unit change in
quantity supplied. Explain your result.
e) Using the formula for the slope of the supply curve, calculate how much price should change if we want
to increase the quantity supplied by 5 thousand kg. Explain your result.
f) Using the formula for the slope of the supply curve, calculate how much price should change if we want
to lower the quantity supplied by 8000 kg. Explain your result.
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