Describe how the supply curve for white beans

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Reference no: EM133426008

Question: The purpose of this question is to illustrate how we use supply and demand equations to determine an equilibrium price and quantity, and then to see how a change in the price of a related good can lead to a shift in the demand curve and lead to a new equilibrium price and quantity. To illustrate these effects, we will continue with white bean example used in Question #1:
QD= 15 - 4PWB + 1.2 PO - 0.6PP + 0.0001Y (Demand)
QS = 0.5 + 10 PWB - 2.5 PSB (Supply)
where QD and QS are the quantities of white beans that are demanded and supplied, respectively (million kg of bean/year)
PWB is the price of white beans ($/kg)
PO is the price of other beans ($/kg)
PP is the price of pork ($/kg)
Y is the per capita income ($000)
PSB is the price of soybeans ($/bu)

a) Using the demand and supply curves above, and assuming PO =$1.30/kg and PP =$1.10/kg and Y=$45,000, and PSB =$15/bu
what is the equilibrium price and equilibrium quantity? Show your work.

b) Suppose the price of soybeans falls from $15/bu to $10/bu. Describe how the supply curve for white beans in Canada change because of the change in the price of soybeans. What is the new market equilibrium for white beans given the new price for soybeans?

Reference no: EM133426008

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