Suppose that the supply of tomato soup in a city is represented by Qs = 100P – 10P - 50 where P is the price of tomato soup and Pr is price of tomato needed to produce tomato soup. All prices are in dollars and quantity is in liters. Assume that the current tomato price is $15. Suppose that the demand for the tomato soup is QD = 1000–60P + 0.31 where P is the price of the tomato soup and I is a representative household's income. Assume that at the equilibrium, income is $12000. a) What are the current equilibrium price and quantity of the tomato soup? Show the equilibrium on a detailed graph. b) Suppose that income decreases to $10400. What is the new equation for the demand for tomato soup? Does this correspond to an increase or decrease in the demand for tomato soup? Show the effect of this event on the equilibrium and the diagram you used in part (a) c) Start from the equilibrium in part a) and now suppose that the price of the tomato increases to $47. What is the new equation for the supply of tomato soup? Does this correspond to an increase or decrease in supply of tomato soup? Show the effect of this event on the equilibrium and the diagram you used in part a)?
Suppose that the supply of tomato soup in a city is represented by Qs = 100P – 10P - 50 where P is the price of tomato soup and Pr is price of tomato needed to produce tomato soup. All prices are in dollars and quantity is in liters. Assume that the current tomato price is $15. Suppose that the demand for the tomato soup is QD = 1000–60P + 0.31 where P is the price of the tomato soup and I is a representative household's income. Assume that at the equilibrium, income is $12000. a) What are the current equilibrium price and quantity of the tomato soup? Show the equilibrium on a detailed graph. b) Suppose that income decreases to $10400. What is the new equation for the demand for tomato soup? Does this correspond to an increase or decrease in the demand for tomato soup? Show the effect of this event on the equilibrium and the diagram you used in part (a) c) Start from the equilibrium in part a) and now suppose that the price of the tomato increases to $47. What is the new equation for the supply of tomato soup? Does this correspond to an increase or decrease in supply of tomato soup? Show the effect of this event on the equilibrium and the diagram you used in part a)?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
100%
The answer should be very detailed and clear, THANK YOU!!!
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education