The demand for organic carrot is given by the following equation Q0 = 75-5P + Pc + 21 where Po is the price of organic carrots, Pc is the price of conventional carrots, and I is the average consumer income. a. Derive the inverse demand function of organic carrots, which is a function of quantity demanded of organic carrots, price of conventional carrot, and average consumer income. b. Graph the demand curve for organic carrots when Pc = 5 and I = 10. Notice that you should denote what the each vertical and horizontal axis is, and the value of the slope and intercepts of the graph(curves). c. Following the demand function(curve) in (b.), what is the quantity demanded of organic carrot when Po = 5? What if P = 0? d. Following the demand function(curve) in (b.), what is the elasticity of demand of organic carrot when Po= 5? What if Po = 10? e. Now given the supply for organic carrot: Qos = 5Po Graph it with the demand curve in (b.), Find the equilibrium quantity Q and price P. f. Graph the demand curve like (b.), yet income increases to = 20. What is a direction the demand curve shifts in this case? what is the new equilibrium quantity Qo' and price Pe g. What happens to the demand for organic carrots when the price of conventional carrots increases? Are organic and conventional carrots complements or substitutes? How do you know? h. Following (d.), Are organic carrots a normal or an inferior good? How do you know?
The demand for organic carrot is given by the following equation Q0 = 75-5P + Pc + 21 where Po is the price of organic carrots, Pc is the price of conventional carrots, and I is the average consumer income. a. Derive the inverse demand function of organic carrots, which is a function of quantity demanded of organic carrots, price of conventional carrot, and average consumer income. b. Graph the demand curve for organic carrots when Pc = 5 and I = 10. Notice that you should denote what the each vertical and horizontal axis is, and the value of the slope and intercepts of the graph(curves). c. Following the demand function(curve) in (b.), what is the quantity demanded of organic carrot when Po = 5? What if P = 0? d. Following the demand function(curve) in (b.), what is the elasticity of demand of organic carrot when Po= 5? What if Po = 10? e. Now given the supply for organic carrot: Qos = 5Po Graph it with the demand curve in (b.), Find the equilibrium quantity Q and price P. f. Graph the demand curve like (b.), yet income increases to = 20. What is a direction the demand curve shifts in this case? what is the new equilibrium quantity Qo' and price Pe g. What happens to the demand for organic carrots when the price of conventional carrots increases? Are organic and conventional carrots complements or substitutes? How do you know? h. Following (d.), Are organic carrots a normal or an inferior good? How do you know?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:The demand for organic carrot is given by the following equation
Q0 = 75-5P + Pc + 21
where Po is the price of organic carrots, Pc is the price of conventional carrots, and I is the average
consumer income.
a. Derive the inverse demand function of organic carrots, which is a function of quantity demanded of
organic carrots, price of conventional carrot, and average consumer income.
b. Graph the demand curve for organic carrots when Pc = 5 and I = 10. Notice that you should
denote what the each vertical and horizontal axis is, and the value of the slope and intercepts of the
graph(curves).
c. Following the demand function(curve) in (b.), what is the quantity demanded of organic carrot when
Po = 5? What if P = 0?
d. Following the demand function(curve) in (b.), what is the elasticity of demand of organic carrot
when Po= 5? What if Po = 10?
e. Now given the supply for organic carrot:
Qos = 5Po
Graph it with the demand curve in (b.), Find the equilibrium quantity Q and price P.
f. Graph the demand curve like (b.), yet income increases to = 20. What is a direction the demand
curve shifts in this case? what is the new equilibrium quantity Qo' and price Pe
g. What happens to the demand for organic carrots when the price of conventional carrots increases?
Are organic and conventional carrots complements or substitutes? How do you know?
h. Following (d.), Are organic carrots a normal or an inferior good? How do you know?
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