Reference no: EM13921842
Assume that before the ice storm of 2003, the weekly demand and supply for ice in the Rochester Metro Area was given by the following equations: Dpre: P = 100 - Q Spre: S = 5 + 0.5Q
a. Draw a graph representing the Rochester ice market before the storm and label it care- fully. What was the equilibrium price for the Rochester ice market before the storm? And the total quantity of ice traded?
b. As a result of the ice storm, electricity went out in the Rochester area. The demand for ice increased due to the lack of electricity to power refrigerators. The lack of power also caused the supply to decrease. Ice producers were still able to produce some ice using electric generators. Other ice had to be imported from other areas with power. The rele- vant post-storm equations are the following:
Dpost: P = 110 - Q Spost: P = 10 + 2Q
Draw a graph representing the Rochester ice market after the storm and label it care- fully. What is the new equilibrium price? What is the quantity?
c. An open-ad in a local newspaper, commenting on the dramatic increase in price of ice following the storm, stated: Obviously, avarice and greed won out over decency and morality as ice-vendors took advantage of the ice storm to increase prices and gouge their loyal customers.
Do you agree with this statement? Explain.
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