8. The inverse demand function for bananas is Pa = 18-30a and the inverse supply function...

 

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8. The inverse demand function for bananas is Pa = 18-30a and the inverse supply function is P, 6+Qs, where prices are measured in cents. (a) If there are no taxes or subsidies, what is the equilibrium quantity? What is the equilibrium market price? (b) If a subsidy of 2 cents per pound is paid to banana growers, then in equilibrium it still must be that the quantity demanded equals the quantity supplied, but now the price received by sellers is 2 cents higher than the price paid by consumers. What is the new equilibrium quantity? What is the new equilibrium price received by suppliers? What is the new equilibrium price paid by demanders? (c) Express the change in price as a percentage of the original price. If the cross-elasticity of demand between bananas and apples is +0.5, what will happen to the quantity of apples demanded as a consequence of the banana subsidy, if the price of apples stays constant? (State your answer in terms of percentage change.) 8. The inverse demand function for bananas is Pa = 18-30a and the inverse supply function is P, 6+Qs, where prices are measured in cents. (a) If there are no taxes or subsidies, what is the equilibrium quantity? What is the equilibrium market price? (b) If a subsidy of 2 cents per pound is paid to banana growers, then in equilibrium it still must be that the quantity demanded equals the quantity supplied, but now the price received by sellers is 2 cents higher than the price paid by consumers. What is the new equilibrium quantity? What is the new equilibrium price received by suppliers? What is the new equilibrium price paid by demanders? (c) Express the change in price as a percentage of the original price. If the cross-elasticity of demand between bananas and apples is +0.5, what will happen to the quantity of apples demanded as a consequence of the banana subsidy, if the price of apples stays constant? (State your answer in terms of percentage change.)

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We have demand function given by D P183Q Supply function given by S P6Q a Equilibrium without subsid... View the full answer