2. (Suppose the estimated supply function for avocados is given by QS = 48 + 15p...

 

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2. (Suppose the estimated supply function for avocados is given by QS = 48 + 15p - 10pf, where pf is the price of fertilizer. The estimated demand for avocados is given by Qd = 233-40p + 5pt, where pt is the price of tomatoes per pound. a. Solve for the initial equilibrium price and quantity of avocados if the price of fertilizer, pf,is equal to $0.35 per lb. and price of tomatoes, pt, is equal to $0.80 per lb. b. Solve for the new equilibrium price and quantity of avocados if the price of fertilizer, pf, increases to $0.90 per lb. and price of tomatoes, pt, remains $0.80 per lb. c. Use these equilibrium values from parts a. and b. to solve for the price elasticity of demand for avocados. d. Given your calculations, are avocados elastic, inelastic or unit-elastic? Have total expenditures on avocados increased, decreased, or not changed as a result of the change in the price of fertilizer? 2. (Suppose the estimated supply function for avocados is given by QS = 48 + 15p - 10pf, where pf is the price of fertilizer. The estimated demand for avocados is given by Qd = 233-40p + 5pt, where pt is the price of tomatoes per pound. a. Solve for the initial equilibrium price and quantity of avocados if the price of fertilizer, pf,is equal to $0.35 per lb. and price of tomatoes, pt, is equal to $0.80 per lb. b. Solve for the new equilibrium price and quantity of avocados if the price of fertilizer, pf, increases to $0.90 per lb. and price of tomatoes, pt, remains $0.80 per lb. c. Use these equilibrium values from parts a. and b. to solve for the price elasticity of demand for avocados. d. Given your calculations, are avocados elastic, inelastic or unit-elastic? Have total expenditures on avocados increased, decreased, or not changed as a result of the change in the price of fertilizer?