Suppose that annual demand in the U.S. market for ice cream cones can be expressed as QD

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Suppose that annual demand in the U.S. market for ice cream cones can be expressed as QD = 800 + .2I - 100P, where QD is the number of cones demanded in millions of cones, I equals average monthly income in dollars, and P is price in dollars per cone. Supply can be expressed as QS = 200 + 150P (with the same units for quantity and price).

a. Graph the demand and supply curves for ice cream cones, assuming that average monthly income is $2,000, and solve for the equilibrium price and quantity.

b. Now assume that average monthly income drops to $750 and supply is unchanged. Draw the new demand curve on the same graph as used in (a) above and solve for the new equilibrium price and quantity. How would you describe the shift in demand intuitively?

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a When income is 2000 the demand curve is QD 800 22000 100P 1200 100P Thus the x intercept is 1200 T...View the full answer

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Managerial Economics and Organizational Architecture

ISBN: 978-0073375823

5th edition

Authors: James Brickley, Jerold Zimmerman, Clifford W. Smith Jr

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Question Posted: Apr 30, 2018 09:02 AM

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Suppose that annual demand in the U.S. market for ice cream cones can be expressed as QD

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a When income is 2000 the demand curve is QD 800 22000 100P 1200 100P Thus the x intercept is 1200 T...View the full answer

Managerial Economics and Organizational Architecture

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