SCENARIO: Suppose you have the following information on the supply and demand GRACE CORNED BEEF (340 g).The inverse demand and supply function for the product is

Demand: Pd = a - 18*Qd ,Supply: Ps = b + 12*Qswhere

a is the intercept of the demand curve (consumers reservation price).

bis the intercept of the supply curve (suppliers' reservation price)

Pd and Ps represent market prices

Qd and Qs represents the quantity demand and supplied respectively

Based on a willingness to pay survey (WIP) it was determined that the maximum amount the average consumer is willing to pay for a CORN BEEF is $400. On the supply side, it was determined that the minimum price at which a Grace Kennedy would be willing to sell the CORN BEEF for is $100.

Use the scenario to answer 1 - 7

1. Calculate the equilibrium price, quantity and total revenue?

(3 marks)

2. Construct a demand and supply graph.

(5 marks)

3. Calculate the consumer surplus and the producer surplus.

(6 marks)

4. Suppose that the government impose a tax of 10% on each tin of CORN BEEF sold calculate the new quantity demanded, quantity supplied and the shortage or surplus?

(6 marks)

5. What is the price that will result in a shortage of 5 units of CORN BEEF?

(4 marks)

6. Suppose obsolete technology makes it 15% more expensive to supply each unit of CORN BEEF(hint: the new supply equation is Ps = 1.15b + 12*Qs )

i. Derive the new equilibrium price, quantity and total revenue.

(3 marks)

ii. Use a graph to illustrate the change inequilibrium resulting from obsolete technology

(5 marks)

7. Given that the consumer income increases by 20%, use the original supply function and a modified demand function, to calculate the

i. new equilibrium price, quantity and total revenue.

(6 marks)

8. Graphically illustrate how TWO demand determinant and how two supply determinants (other than income and technology) affect the market equilibrium for COR