Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 22, Problem 11CQ
To determine
The effects of drought in a perfect competitive market.
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The food and feed demand curves used in the Application "Summing the Corn Demand Curves," were estimated by McPhail and Babcock (2012) to be
Qfood = 1,487-22.1p
and
Qfeed = 6,247.5-226.7p,
respectively, where Q is measured in billions of bushels of corn per year. Mathematically derive the total demand curve, which the application's figure illustrates. (Hint:
Remember that the demand curve for feed is zero at prices above about $27.56 per bushel.)
The total demand curve is (enter your responses rounded to one decimal place):
Q=-p for p≥ $27.56 per bushel and Q =
-p for p <$27.56 per bushel.
A retail chain will buy
900
cordless phones if the price is
$30
each and
800
if the price is
$40.
A wholesaler will supply
350
phones at
$40
each and
1400
at
$70
each. Assuming that the supply and demand functions are linear, find the market equilibrium point and explain what it means.
D1 D2
P2
P1-L
Q1 Q2
Company X is a Georgia-based automobile manufacturer that produces a single model of car, the Destiny. Another company, Company
Y, produces a car known as the Kismet that is widely viewed by the automobile industry as the Destiny's equal. Which of the following
developments would MOST LIKELY lead to the changes illustrated on the graph in the market for the Destiny?
a significant decline in the price of the Kismet
a significant rise in the income levels of consumers interested in the Destiny
Chapter 22 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- You are the Economic Consultant for Zuku Farms Ghana Limited. Zuku produces cowpea in a community where producers are able to switch back and forth between cowpea and groundnut depending on market conditions. Consequently, you were tasked by the management of Zuku and you estimated the demand function for cowpea as follows: where is the quantity of cowpea demanded in bags per month, is the average price of cowpea in Ghana Cedis, is the average price of groundnut in Ghana Cedis, and Y is the income of consumers. Assuming is initially GH¢31.00 per bag, Y is GH¢1001.50. Also that your estimated supply function for cowpea is as follows: QS = -25 + 3.5PC -1.5Pf – 0.5Pg + 0.25R Where Qs is the quantity supplied of cowpea in bags, Pc and Pg are as defined above, Pf is the price of fertilizer per bag, R is the amount of rainfall (in inches). If Pf = GH¢10, R= 40 inches and Pg= GH¢31.00 Find the resulting supply function for cowpea and determine the equilibrium price and quantity.…arrow_forwardplease answer part darrow_forwardParts B and Carrow_forward
- One of the pandemic measures adopted by the city of Regina consists of a food-delivery fee cap (maximum fee) of 14% of the pre-tax order price. This fee is charged by delivery services such as Uber Eats, DoorDash, and Skip the Dishes. Some restaurants in the city argue that the cap (in percentage terms) is to high due to the small profits earned in this industry. Represent graphically the equilibrium in the market for food (restaurants) in the city in the absence of any interventionsarrow_forwardDraft a numerical example using the following prompt: Create a numerical example of a two-commodity market with linear demand and supply curves. The two goods should be substitues and the example should model actual goods found in the real world. The solution should have a price and quantity solution with a reasonable economic interpretation (i.e. no negative prices or quantities)arrow_forwardYou are the manager of medium-sized company that deals in production of make-ups in Ghana. Suppose one morning you heard on the news that the government has imposed a lump sum tax on every unit of make-up sold in the market. In addition, suppose during the same period, the price of a leading substitute product decreases along with the change the effect of the tax mentioned above, how would you expect the equilibrium price and quantity of make-up to change assuming the effect of the lump sum tax is larger? [Illustrate by using a graph].arrow_forward
- The market for a brand of yellow maize is in equilibrium. Explain, with the aid of a separate diagram in each case, the effects which each of the following is most likely to have on the equilibrium position: a) Due to the serious drought, there is a reduction in the aggregate harvest. b) A fall in the price of fertiliser, a key input in the production of the yellow maize. c) The price of beef has gone up tremendously and yellow maize is a key feed for beef animals.arrow_forward1. As an agriculture analyst for the Union of American Fruit Producers (UAFP), you are in charge of monitoring the US peach market. The market can be described by the following "calibrated" demand and supply functions: Qd = 1600-8P +8Pn Qs = 34P-102 (1) (2) where P is the price of a crate of peaches, Pn is the price for a crate of nectarines, and Qd and Q, are the quantity demanded and the quantity supplied of peaches (measured in thousands of crates). (a) Find the inverse demand and inverse supply equations. Hypothetically, how many crates of peaches should UAFP expect consumers to buy if peaches are given away free of charge in a marketing campaign? If the price of a crate of peaches was to increase, at what price would buyers no longer be willing to buy any peaches? (Hint: your previous answers will be expressions that depend on the value of P) If the price of peaches was to decrease, at what price would the quantity of peaches supplied fall to zero? (b) Assuming that P₁ = $55,…arrow_forward1. Congratulations, you've been hired as a market analyst for the Federation of Quebec Maple Syrup Producers (QMSP) and you will be responsible for monitoring the market for maple syrup. The market can be described by the following calibrated demand and supply functions: Qd = 1180-20P +2P, (1) (2) Qs = 50P-200 where P is the price of a 16oz bottle of syrup, Pį is the price for a bottle of maple flavored corn syrup, and Qd and Q, are the quantity demanded and the quantity supplied of maple syrup. (a) How much maple syrup should the QMSP be prepared to give away if they decided to give maple syrup to everyone who wants it free of charge as a marketing ploy? (Hint: your answer will depend on Pt) Find the inverse demand and inverse supply equations. Determine the highest price at which suppliers would not be willing to sell any syrup. (b) Assuming that P, = 10, graph (inverse) supply and (inverse) demand for the market with a clearly labeled graph and calculate the equilibrium price (P*)…arrow_forward
- Botswana and South Africa both produce laptops. Botswana produces the Lenovo brand whereas South Africa produces the Acer brand. The demand and supply structure in both countries are given by the Dixit-Stiglitz model, with an elasticity of substitution equal to two in both countries. Assume that the laptop market in Botswana is much large than in South Africa. In both countries, the marginal labour input requirement is one and the fixed labour input per variety is 2.5. Botswana's labour employment in the cell phone industry is 20 million people whereas that of South Africa is 10 million people. Determine the number of varieties that will be supplied to Botswana and South Africa laptop markets in Autarky.arrow_forwardConsider an equilibrium of a single product market jointly determined by a supply function q* = a, + a, * p* + U and a demand function q* = Bo + B1 * p* + V, where q* indicates the equilibrium quantity and p*indicates the equilibrium price, then A. we will run into the simultaneous equations problem, which will cause estimation inconsistency. B. we can have bi-directional causality between q* and p*. C. q* and p*will both be endogenous. D. all of the above.arrow_forwardBigSwaba Corp produces virus home test kits which it sells in the market. It pays a marketing company to post Instagram images of people using the kits in the comfort of their own homes. The demand for the kits and cost of production are as follows: 1 1 Cost: C=200+=q´ +m 1/2 Demand: p=48+m/: Where m is the firm's marketing expenditure. Assume the CEO of BigSwaba asks you to help the company maximize profit. а. How many kits should the company sell and at what price? b. What is the demand elasticity at this output level? C. What should their marketing budget be? Assume the CEO of BigSwaba realizes her bonus will determined not by profits, but by the firm's revenue. Maintaining the same marketing budget as in part a: d. What quantity should the firm produce to maximize revenue?arrow_forward
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