The estimated monthly U.S. demand function for avocados is Q = 144 - 40p + 20pt where
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The estimated monthly U.S. demand function for avocados is Q = 144 - 40p + 20pt where p is the price of avocados and pt is the price of tomatoes, a substitute for avocados. The estimated supply function is given in Question 2.1, where the price of fertilizer, pf, is $0.40, so the supply function can be written as Q = 50 + 15p. The initial price of tomatoes is 80¢ per lb. Using algebra, determine the initial equilibrium price and quantity of avocados, and then determine how price and quantity change if the price of tomatoes increases by 55¢ to $1.35.
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Managerial Economics And Strategy
ISBN: 9780134899701
3rd Edition
Authors: Jeffrey M. Perloff, James A. Brander
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