Compute the elasticities of demand for and supply

Reference no: EM1338349

For each of the following problems, provide a mathematical solution, well-labeled diagrams, and written explanations

1) Suppose the demand and supply curves for broccoli in the U.S. 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) Find the equilibrium market price and quantity for broccoli, and plot the demand and supply curves on a graph.

b) Calculate the elasticities of demand for 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: EM1338349

Questions Cloud

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

Defining the history : What do we mean by history? Is history the search for truth? Is our understanding of what we mean by history dependent on our own societal background.

Give difference between perception and reputation : give difference between perception and reputation

Internal consultant : What if the Internal Consultant has intimate knowledge of the organization and has a different perspective on Operations than one particular line manager. Is it permissable to say 'no' in this case? why or why not?

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

Fundamental trade-offs to crash a project : Describe the fundamental trade-offs made when deciding whether or not to crash a project.

Compute the overall return on investment of the project : compute the overall return on investment of the project and then present a breakeven analysis , perform the BEA at what point does breakeven occur.

Explain new businesses and entrepreneur personality : Explain New Businesses and Entrepreneur Personality and New businesses require several things to be successful

Difference among an increase in demand and an increase : Could you please explain fully the difference among an increase in demand and an increase in quantity demanded, by giving an example of what would cause an increase in quantity demanded and please illustrate the effect of such an increase with a ..

User Account

All Pages