Is it possible to reach a market equilibrium

Reference no: EM133388818

Question 1: Consider the market for orange juice. In this market, the supply curve is given by QS = 100PJ -20PO and the demand curve is given by QD = 1000-150PJ +100PC, where J denotes orange juice, O denotes Orange, and C denotes coffee.
1) Assume that PO=10 and Pc = 8. Calculate the equilibrium price and quantity in the Orange juice market.
2) Suppose that a poor harvest season raises the price of oranges to Po = 15
a) Is it possible to reach a market equilibrium if the price of orange juice PJ remains unchanged? Why? How much quantity of orange juice will finally be exchanged on the market?
b) Find the market price necessary to restore equilibrium. Deduce the equilibrium quantity of orange juice.

3) Draw a graph to illustrate your answers.

Question 2
Suppose the price elasticity ofdemand for the market of mobile phones is 0.90.

a. If all mobile-phone companies simultaneouslyincreased their prices, will total revenue in theindustry increase or decrease?
b. If a single mobile-phone company increasedits price, would you expect the company's totalrevenue to increase or decrease? Explain.
c. Suppose that the price in the market is initially $10 and the quantity demanded is 100 units. If the price in this market increases by 10%, what will be the percentagechange in the quantity demanded?

Question 3:
If you have SAR 50,000 to start a new business,you can earn 10 percent interest onmoney in a bank account. Your business expenses are SAR 22,000 per year on rent, SAR 18,000 per year on supplies, and SAR 5,000 per year on part time help. As for your personal expenses, your apartment costs youSAR 12,000 per year and your personal bills are an extra SAR 6,000 per year. What is your opportunity cost of running the business?

Reference no: EM133388818

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