6. Lumber and sawdust are joint products, whose demand functions are DL and DS, as shown in the diagram. The quantity axis measures the number of trees. Points on the demand schedules indicate demands for the lumber or sawdust equivalents of a given quantity of trees.

a. Provide an economic interpretation of the fact that the demand schedule for sawdust extends below the horizontal axis.

b. If the supply schedule for trees is as given in the diagram, show the equilibrium prices and quantities of sawdust and lumber on a graph.

Transcribed Image Text:

P 0 Supply of trees Ds DL