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Suppose the demand function for oranges is qd = 200-5p, and the supply function is qs = 20p + 150. (a) Find the market equilibrium price p? and quantity q?. (b) Calculate the demand elasticity at the optimal price: D (p?) and supply elasticity S (p?). The government sets a price support of the price pS = 3. (c) * Is this a binding or non-binding price support? Explain. (d) * Will this price support help orange farmers? Explain. (e) * Will this price support help orange consumers? Explain. (f) * How much will this price support cost the government?
1. describe and explain the budget constraint. how does a consumer maximize utility under a given budget constraint?
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