Compute the elasticities of demand and supply

Reference no: EM1374530

1) Assume the demand and supply curves for broccoli in the United States market are given by:
Qd = 1000 - 5P Qs = 4P - 80
Quantities are in hundreds of bushels per year and price is in dollars per hundred bushels.

a) Determine the equilibrium market price and quantity for broccoli, and plot the demand and supply curves on a graph.

b) Compute the elasticities of demand and supply of broccoli at the market equilibrium, and interpret the meaning of these numbers.

c) Suppose you calculate the cross price elasticity of demand for broccoli with respect to green beans and find it is equal to 2.3. Interpret the impact on broccoli demand of a 10% increase in the price of green beans.

d) If a price floor (minimum allowable price) set at $150/hundred bushels is imposed on broccoli, how will this affect the market? Sketch a diagram showing the impact on consumer and producer surplus. (No calculations required; demonstrate graphically.) Assume the government only imposes the price floor, and doesn't intervene in other ways in this market.

Reference no: EM1374530

Questions Cloud

Explain how it aids in planning : explain how it aids in planning, Classifying also resolving specific price and schedule or quality problems associated with program.

Elucidates why people are important organizational supply : Elucidates why people are most important organizational supply, define their information as well as technology literacy challenges and discuss their ethical responsibilities.

Elucidate how much should be ordered each time to minimize : Holding expenses of inventory are 24% of purchase price every year. Elucidate how much should be ordered each time to minimize total cost.

Maintaining the current level of government expenditures : Assume that the government proposes to cut taxes while maintaining current level of government expenditures. To finance this deficit, it may either

Compute the elasticities of demand and supply : Assume that the demand and supply curves for broccoli in the United States market are given by:

Difference between increase in demand and quantity demanded : Describe the difference between rise in demand and an increase in quantity demanded, through giving an example of what would cause an rise in quantity demanded

Account competitive pressures : Explain why are prices usually higher for goods or services in London as opposed to Newcastle, or New York as opposed to San Fran?

Discuss characteristics of the labor markets : Describe and discuss why characteristics of the labor markets should result in the similar wage rate for all jobs requiring the similar level of abilities and skills?

Relationship in market and aggregate supply and demand : Describe how the circular flow diagram illustrates the interaction of households, governments, and business and Describe the relationship between market and aggregate supply and demand?

User Account

All Pages