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Consider the market for coffee in State College. Let the marginal benefits of coffee consumption for State College residents be given by the equation MB = 15 - 0.0002 Qd where MB denotes marginal benefit ($/cup) and Qd denotes cups of coffee consumed. This is the coffee demand curve.
Similarly, let the marginal cost to suppliers of providing coffee be given by the equation MC = 0.25 + 0.00004 Qs where MC denotes marginal cost ($/cup) and Qs denotes the number of cups supplied. This is the coffee supply curve.
A) Plot the demand and supply curves together on a graph. Comment on the slopes of these curve. Why does the supply curve slope upward and the demand curve slope downward?
B) Using the supply and demand equations given above, solve for the coffee price and the number of cups sold that will emerge in a competitive market.
How do i answer this without knowing the price?
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