Question
Suppose the estimated supply function for avocados is given by Q S = 58 + 15 p - 20 p f , where p f
Suppose the estimated supply function for avocados is given byQS = 58 + 15p -20pf , wherepf is the price of fertilizer. The estimated demand for avocados is given byQd = 144 -40p +20pt , wherept is the price of tomatoes per pound.
- (3) Solve for the initial equilibrium price and quantity of avocados if the price of fertilizer,pf,is equal to $0.40 per lb. and price of tomatoes,pt, is equal to $0.80 per lb.
- (3) Solve for the new equilibrium price and quantity of avocados if the price of fertilizer,pf, increases to $1.10 per lb. and price of tomatoes,pt, remains $0.80 per lb.
- (3) Use these equilibrium values from parts a. and b. to solve for the price elasticity of demand for avocados.
- (2) Given your calculations, are avocados elastic, inelastic or unit-elastic? Has the total revenue of avocado producers increased, decreased, or not changed as a result of the change in price and quantity?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Smith and Roberson Business Law
Authors: Richard A. Mann, Barry S. Roberts
15th Edition
978-0538473637
