SAU MBA-626: Problem Set #1: Principles Review 3. Calculating Equilibrium Price and Quantity with Linear Supply and Demand: Inverse demand and supply are function are: Boats Point Cheese Boats P =125 - 40a A 0 55 A B 15 50 P =5+20, 55 25 40 P = Price E 30 30 Qs = Quantity Supplied 50 32 20 Qa = Quantity Demanded C 33 10 a. Find equilibrium price and quantity. 30 F 20 b. If an advertising campaign influences consumer's tastes and changes the c. demand curve to: P=185-40. What is the new equilibrium price and quantity? 10 15 25 30 32 33 c. Does the change in (b) represent an increase or a decrease in demand? Cheese Part I: Opportunity Cost along a Production Possibilities Frontier 1. Complete the table below: Between Opportunity Cost of One Unit Points Cheese Boats A & B B & C 4. Inverse demand and supply are function are: C & D P = 210 - Qa D & E P = 5Qs E & F P = Price Part II: Supply and Demand Qs = Quantity Supplied 2. Shifts in Supply and Demand: Using supply and demand diagrams show the effects on Qa = Quantity Demanded equilibrium price and quantity for the following situations. Begin at an initial equilibrium and show the effects on the demand or supply curves, as well as the effect on equilibrium price and a. Find equilibrium price and quantity. quantity. a. The impact of a drought in the Midwest on the market for wheat. b. If a change in production costs changes the supply curve to: P = 30 + 5Qs. b. The impact of a fall in the price of steel on the market for new cars. What is the new equilibrium price and quantity? c. The impact of a study showing orange juice consumption lowers the risk of heart attacks on the market for orange juice. c. Does the change in (b) represent an increase or a decrease in supply? d. The impact of an increase in the price of hot dogs on the market for hot dog buns