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Unformatted text preview: Rice University ECON 211, Fall 2007 Problem Set 2 Due on Thursday/Friday, September 13/14 1. ( 12 pts. ) Diagram the effects of the following events on the supply and/or demand for raisin bran cereal: a) The price of raisin increases. b) The price of milk decreases. c) The price of corn flakes decreases. d) Drought kills off much of the nations wheat crop, which is an ingredient of raisin bran cereal. e) Researchers find that bran makes you live longer. f) Average family income increases. 2. ( 4 pts. ) The demand function for potato chips is P D = 210- Q and the supply function is given by P S = 2 Q- 225, where P denotes cents per bag and Q is for quantity in millions of bags per week. a) What are the equilibrium price and quantity of potato chips? b) Suppose a new dip comes into the market, which is very popular and the demand for potato chips increases by 30 million bags per week. What are the new equilibrium price and quantity of potato chips?...
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This note was uploaded on 05/03/2008 for the course ECON 211 taught by Professor Na during the Spring '08 term at Rice.
- Spring '08