The simple equations in the first problem ignore the effects of variables other than the price...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The simple equations in the first problem ignore the effects of variables other than the price on supply and demand. More complete represen- tations of supply and demand curves might include additional variables other than just the price. Suppose that the supply of wheat depends on the price of wheat (p) and the amount of rainfall (r). The demand for wheat depends on the price of wheat and the level of disposable income (I). The equations describing the supply and demand relationships are: Qs = 20r + 100p QD=4000-100p+101 (a) Sketch a graph of demand and supply curves that shows the effect of an increase in rainfall. How does each of the curves shift (if at all) from the increase? What is the effect on equilibrium price and quantity? (b) Sketch a graph of demand and supply curves that shows the effect of an increase in disposable income. How does each of the curves shift (if at all) from the increase? What is the effect on equilibrium price and quantity? (c) Now you are to confirm your graphs with algebra. Solve the supply and demand equations for the equilibrium price and quantity, Q* and p" as a function of the exogenous variables I and r. (d) Explain how the variables I and r affect the equilibrium price accord- ing to your answers to (c). Does it conform to the graphical analysis in part (a)? The simple equations in the first problem ignore the effects of variables other than the price on supply and demand. More complete represen- tations of supply and demand curves might include additional variables other than just the price. Suppose that the supply of wheat depends on the price of wheat (p) and the amount of rainfall (r). The demand for wheat depends on the price of wheat and the level of disposable income (I). The equations describing the supply and demand relationships are: Qs = 20r + 100p QD=4000-100p+101 (a) Sketch a graph of demand and supply curves that shows the effect of an increase in rainfall. How does each of the curves shift (if at all) from the increase? What is the effect on equilibrium price and quantity? (b) Sketch a graph of demand and supply curves that shows the effect of an increase in disposable income. How does each of the curves shift (if at all) from the increase? What is the effect on equilibrium price and quantity? (c) Now you are to confirm your graphs with algebra. Solve the supply and demand equations for the equilibrium price and quantity, Q* and p" as a function of the exogenous variables I and r. (d) Explain how the variables I and r affect the equilibrium price accord- ing to your answers to (c). Does it conform to the graphical analysis in part (a)?
Expert Answer:
Answer rating: 100% (QA)
a Rainfall only affects the supply curve of wheat and not the demand curve as the rainfall component ... View the full answer
Related Book For
Macroeconomics Principles and Applications
ISBN: 978-1133265238
5th edition
Authors: Robert e. hall, marc Lieberman
Posted Date:
Students also viewed these economics questions
-
Using the data on supply and demand in problem 3, suppose the EU imposed a quota on imports of beef equal to 40 million pounds of beef per month a. What would be the price of beef in the EU? b. How...
-
Suppose that money demand depends on disposable income, so that the equation for the money market becomes M/P = L(r , Y T). Analyze the impact of a tax cut in a small open economy on the exchange...
-
Using the data on supply and demand in problem 3, suppose the EU imposed a tariff of 2 euros on each pound of beef a. How much beef would EU producers supply? b. How much beef would EU consumers...
-
Do you consider the Internet message boards that Anjali wishes to use to be public or private? How would you justify your answer? Anjali, was in her final year of study for an undergraduate business...
-
How are dividends used as a signaling device by corporate management? To the extent that dividends are a signaling device, how are dividend changes related to stock prices?
-
A two-tank filling system is shown in figure. E. Both tanks are used in a similar way. Tank 1 is empty when the level is less than L1 and is full when the level is greater than L2. Initially, both...
-
In February 2014, defendant Ibrahim M. Shihadeh, d/b/a Creative Designs Kitchen and Baths, agreed to purchase 25% of his anticipated natural gas needs at a fixed price for the 201415 and 201516...
-
Cherokee Inc. is a merchandiser that provided the following information: Amount Number of units sold . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Selling price per unit . . . . . . . . . ....
-
Why won't a relational model work with Big Data?
-
In this scenario where would you change the percentage? Under the growth fund or income fund or money market? Dollars Growth Fund Income Fund Money Market % Return 120000 20% 30000 10% 150000 6%...
-
Write pseudo code to implement all these algorithms in JAVA? (4 Points each) 1). Bubble Sort 2). Heap sort 3). Merge Sort 4). Kruskal's Algorithm 5). Dijkstra's Algorithm 6). Breadth First Search 7)....
-
7. A water treatment plant has a remaining service life of 15 years. It costs $675,000 per year to operate and maintain the facility. The O&M costs are expected to stay constant for the first three...
-
Implement a recursive program that takes in a number and finds the square of that number through addition. For example if the number 3 is entered, you would add 3+3+3=9. If 4 is entered you would add...
-
1. How should sport public relations professionals cultivate relationships with the media? 2. How should a press release be written, and what information needs to be given? 3. How should...
-
Vice Ganda pays a monthly amortization of 100k for a parcel of land. The amortization factor for 3 years at 15% interest is 0.03467. If Vice Ganda paid a down payment of 20% of the contract price,...
-
Why is there an error in the following code? package mid; 1 2 P m ST LO 10 7 CO 9 10 - 14 15 public class OverDemo { public static void func1(int x, double y) { } } public void func1 (double a,...
-
Draw a Feynman diagram for the reaction n + v p + .
-
In Figure, suppose that, initially, McCollum is providing the fifth guitar lesson to Zoe for a price of $16. Who would gain and who would lose from this lesson and howmuch? Dollars MSC 1.00 S $2.00...
-
Suppose the demand for unskilled labor were completely inelastic with respect to the wage rate. Using graphs similar to those in Figure, but modified to reflect this new assumption, explain how a...
-
Could any combination of home price, mortgage, or further borrowing on a home result in a simple leverage ratio of 1/2? If yes, provide an example. If no, briefly explain why.
-
Marfan syndrome is a rare inherited human disorder characterized by unusually long limbs and digits plus defects in the heart (especially the aorta) and the eyes, among other symptoms. Following is a...
-
An individual has the genotype Aa Bb Cc and makes an abnormal gamete with the genotype AaBc. Does this gamete violate the law of independent assortment or the law of segregation (or both)? Explain...
-
A true-breeding tall pea plant was crossed to a true-breeding dwarf plant. What is the probability that an F1 individual will be truebreeding? What is the probability that an F1 individual will be a...
Study smarter with the SolutionInn App