Suppose that we are thinking about a farmers market for mangos. As the price adjusts, sellers are able to see all the sales they are able to make at these given prices. This produces a demand schedule for mangos given by: Price Quantity $5.00 0 $4.50 12 $4.00 30 $3.50 55 $3.00 90 $2.50 135 $2.00 190 $1.50 255 $1.00 330 $0.50 415 $0.00 510 10. Suppose that the price drops from $3.00 to $2.50. Calculate the elasticity of demand for this part of the demand curve. (Hint: use the $3.00 and $2.50 as the reference points to get your p and Q values). Show your work. [2 points] 11. Is demand elastic, inelastic, or unit elastic in this portion of the demand curve. How do you know? [1 point] Note that for each $0.50 drop in the price, the quantity is actually increasing at an increasing rate. To see this, for example, compare the change in Q when you go from $4.50 to $4.00 and when you go from $1.00 to $0.50. 12. Given that the quantity purchased is actually increasing by a lot more as the price gets lower for a given $0.50 change, does this mean that demand is getting more elastic as the price is dropping? Why or why not? Show your work. [3 points] Now suppose that the price of mangos has settled at $3.00 with 90 mangos being sold. At the same market, there are sellers who have been selling papayas for $5.00 each. But now, the price of papayas drops to $3.00 each. The mango sellers see the quantity of their mangos sold increase to 110 mangos sold. 13. Calculate the cross-price elasticity of mango sales (Quantity) with respect to the price of papayas. Show your work. [2 points] 14. Are mangos and papayas compliments or substitutes in this example. How do you know? [2 pointslFart 1:5upply The sellers for bicycles note that ifthe price reaches as low as 530, theywill not be able to supply any bicycles for the market. However, once the price rises above SEQ, they will provide 5 bicycles for each 52C! increase in the price. This is enough information to write down the equation for the supply curve. 6. Write down the equation for the supply curve in the form of I11 = a + b*p. Where a 3.: b are the numbers that dene the supply curve [note that they may be negative]. Show your work. [2 points] Part 2: Demand Similarly, in this local market, people really do like bicycles. Their enjoyment for bicycles does have limits however, and once the price reaches Sl, nobody will buy any bicycles any more. The bicycle industry did do a consumer survey recently however and also found out that if they set the price to Sl, there would be demand for SCI bicycles. This is enough information to write down the equation for the demand curve. 3'. Write down the equation for the demand curve in the form of I11 = c + d*p. Where c 3.: d are the numbers that dene the demand curve [note that they may be negative]. Show your work. [2 points] Part 3: Equilibrium Given that we have both supply and demand now, we can determine the market equilibrium for prices and quantities. Recall that equilibrium will occur when, for a given price, the quantity supplied [Ct] is exactly equal to the Quantity demanded [Q9]. 3. Plot both demand and supply curves together, showing the point of equilibrium, and labelling the equilibrium price and quantity specically [including the values for [1* [t p* - show your work for how you get these]. As always, have quantity [[1] on the xaxis and price [p] on the y-axis. [5 points] 9. Are Demand and Supply elastic or inelastic in this case? Which is more inelastic in this case? How do you know? [1 point]