The markets for bananas, muffins, and coffee are interrelated, and each market is perfectly competitive. (a)...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The markets for bananas, muffins, and coffee are interrelated, and each market is perfectly competitive. (a) In the market for bananas, the equilibrium price is $1.00 per pound, and the equilibrium quantity is 1,000 pounds per week. Suppose the government imposes a price floor on bananas at $1.20 per pound, causing the quantity supplied to increase to 1,500 pounds per week. (i) Would the price floor result in a shortage, a surplus, or neither? Explain. (ii) Calculate the price elasticity of supply if the price increases from $1 to $1.20. Show your work. (iii) Between $1 and $1.20, is the supply elastic, unit elastic, or inelastic? Explain. (b) Bananas are an input for muffins. (i) Draw a correctly labeled graph of the market for muffins indicating the equilibrium price and quantity, labeled Po and Qo, respectively. (ii) On the graph drawn in part (b)(i), show the impact of an increase in the price of bananas on the muffin market, labeling the new equilibrium price and quantity Pi and Qi, respectively. (iii) On the same graph, completely shade the area that represents the change in the consumer surplus caused by the increase in the price of bananas. c) In the market for coffee, the equilibrium price is $3.00 per cup and the equilibrium quantity is 100 cups per week. The cross-price elasticity of coffee with respect to muffins is -2. (i) Are coffee and muffins normal goods, inferior goods, complementary goods, or substitute goods? (ii) Assume the supply of coffee is perfectly elastic. Using the equilibrium price and quantity given above, draw a correctly labeled graph for the coffee market, and show the impact of an increase in the price of muffins on the coffee market. Given the original quantity of 100 cups of coffee per week, if the increase in the price of muffins is 10%, calculate the new equilibrium quantity in the coffee market. Show your work. The markets for bananas, muffins, and coffee are interrelated, and each market is perfectly competitive. (a) In the market for bananas, the equilibrium price is $1.00 per pound, and the equilibrium quantity is 1,000 pounds per week. Suppose the government imposes a price floor on bananas at $1.20 per pound, causing the quantity supplied to increase to 1,500 pounds per week. (i) Would the price floor result in a shortage, a surplus, or neither? Explain. (ii) Calculate the price elasticity of supply if the price increases from $1 to $1.20. Show your work. (iii) Between $1 and $1.20, is the supply elastic, unit elastic, or inelastic? Explain. (b) Bananas are an input for muffins. (i) Draw a correctly labeled graph of the market for muffins indicating the equilibrium price and quantity, labeled Po and Qo, respectively. (ii) On the graph drawn in part (b)(i), show the impact of an increase in the price of bananas on the muffin market, labeling the new equilibrium price and quantity Pi and Qi, respectively. (iii) On the same graph, completely shade the area that represents the change in the consumer surplus caused by the increase in the price of bananas. c) In the market for coffee, the equilibrium price is $3.00 per cup and the equilibrium quantity is 100 cups per week. The cross-price elasticity of coffee with respect to muffins is -2. (i) Are coffee and muffins normal goods, inferior goods, complementary goods, or substitute goods? (ii) Assume the supply of coffee is perfectly elastic. Using the equilibrium price and quantity given above, draw a correctly labeled graph for the coffee market, and show the impact of an increase in the price of muffins on the coffee market. Given the original quantity of 100 cups of coffee per week, if the increase in the price of muffins is 10%, calculate the new equilibrium quantity in the coffee market. Show your work.
Expert Answer:
Related Book For
Posted Date:
Students also viewed these accounting questions
-
CANMNMM January of this year. (a) Each item will be held in a record. Describe all the data structures that must refer to these records to implement the required functionality. Describe all the...
-
Matrix squaring. Write a program like Markov that computes page ranks by repeatedly squaring the matrix, thus computing the sequence p, p 2 , p 4 , p 8 , p 16 , and so forth. Verify that all of the...
-
When a particle of mass 9.1 x 10-28 g in a certain one-dimensional box goes from the n = 5 level to the n = 2 level, it emits a photon of frequency 6.0 x 1014 s-1. Find the length of the box.
-
Golden Cycles started August with 12 bicycles that cost $42 each. On August 16, Golden purchased 40 bicycles at $68 each. On August 31, Golden sold 36 bicycles for $84 each. Requirements 1. Prepare...
-
Thomas Rusnack and his then-wife, Analisa Rusnack, opened a home equity line of credit (HELOC) with Cardinal Bank in August 2003. Between 2003 and 2006, the Rusnacks periodically drew on the HELOC...
-
Two accountants for the firm of Allen and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following...
-
Contemporary psychoanalysis has undergone a paradigm shift from drive reduction to the relational model. The most fundamental difference between relational and classical forms of psychoanalysis is...
-
A spring-mass system with a hardening spring (Problem 32 of Section 3.7) is acted on by a periodic external force. In the absence of damping, suppose that the displacement of the mass satisfies the...
-
Wellness as the "new sustainability" The notes in this unit introduced the idea that green buildings can have positive effects on workplace productivity and employee health. The article provided to...
-
Discuss the magnitude of COVID-19 government relief money and whether or not the money is going to the correct purpose. What are some of the challenges that public administrators face with handling...
-
On December 31, 2018, Deb's employer gave her a Tag Heuer Limited Edition Tom Brady watch because Deb met her sales quota for the year. Debs employer originally purchased the watch in 2017 for...
-
Given the following program that takes as input the first name of a person and using a switch statement, prints the first and last name together if a match has been found. public class problemOne {...
-
manufacturing costing system uses a? three-part classification of direct? materials, direct manufacturing? labor, and manufacturing overhead costs. Read the requirements Requirement 1. Calculate...
-
Write a draft about SEPARATION OF DUTIES
-
A 2500-lbm car moving at 15 mi/h is accelerated at a constant rate of 15 ft/s 2 up to a speed of 50 mi/h. Calculate force and total time required?
-
Bethany, who weighs 560 N, lies in a hammock suspended by ropes tied to two trees. One rope makes an angle of 45 with the ground; the other makes an angle of 30. Find the tension in each of the ropes.
-
In the Skycoaster amusement park ride, riders are suspended from a tower by a long cable. A second cable then lifts them until they reach the starting position indicated in Figure P5.3. The lifting...
-
In the winter sport of curling, two teams alternate sliding 20 kg stones on an icy surface in an attempt to end up with the stone closest to the center of a target painted on the ice. During one...
Study smarter with the SolutionInn App