Where Qs is monthly supply of bottles of Syrah (in millions), Po is the price of Syrah in the market, PPI is the Producer Price Index (an index used to gauge changes in the costs of production in the US), Ps is the price of substitute wines which could easily be produced instead of Syrah, Temp is the expected temperature during the harvest season for grapes, and Sup is the number of wineries that supply Syrah in the market (in thousands). Using the market supply and demand functions for Syrah given, fill in the template provided with the coefficients for each function. Using the information below, fill in the values for each of the variables except Price of Syrah. Demand: -Price of Substitutes: $18 -Price of Cheese: $15 -Income: $53 (in thousands) -Trade Shows/Competitions: 3 -Millennials = 45 (in millions) Supply -PPI: 111 -Price of Substitutes: $18 -Temperature: 60 -Number of Suppliers: 8 (in thousands) MARKET DEMAND MARKET SUPPLY Coefficients Values Coefficients Values Intercept 200 Intercept -100 Price of Syrah -38.18 Price of Syrah 22.93 Price of Substitutes 8.35 18 PPI -5 111 Price of Cheese -2 15 Price of Substitutes -10 18 Income 10 53 Temperature 8 60 Trade Shows 0.8 3 Suppliers 8 Millennials 0.5 45 Qs =1 -347.00 Qd = 875.20 a) When the price of Syrah increases by $1, do supply and demand increase or decrease? b) By how much? What is the effect on quantity demanded and quantity supplied?39 j) How much is the shortage or surplus? 40 i) 41 There is a shortage equal to 244.44 million bottles. 42 k) Trying prices in $1 increments between $16 and $22, at what price and quantity does the market equilibrium occur? Quantity Quantity Price demanded supplied 43 (in millions) (in millions) 44 $16.00 264.32 19.88 $17.00 226.14 42.81 $18.00 187.96 65.74 $19.00 149.78 88.67 48 $20.00 111.60 111.60 $21.00 73.42 134.53 $22.00 35.24 157.46 Equilibrium price = $20.00 Equilibrium quantity = 111.60 million bottles 9 8 8 8 8 898 8 1) Suppose the costs of production increase to 123.222. If the price of wine stays at the point determined in part k, what will be supplied in the market? PPI = 123.222 Qs = L million bottles m) Will this create a shortage? If the costs of production increase to 123.222 and the price of wine stays at the point determined in part k this will create a shortage. 58 n) With the increase in production costs to 123.222, at what price will the market be in equilibrium again? Quantity Quantity Price demanded supplied 59 (in millions) (in millions) 60 $18.00 61 $19.00