Markets4a - P Í Í Í D D 1 0 Q Decrease in tastes and preferences for cantaloupes(2 an increase in the price of honeydew melons 2 P Î Î Î D 1

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Additional Problem 4 : Market Analysis (Answer Key) The demand for cantaloupe melons is P = 120 - 3 Qd, and the supply is P = 5 QS, where P is the price per pound (in cents) of a cantaloupe, Qd is the quantity demanded per year, and Qs the number supplied (both in millions of pounds). (a) What is the equilibrium price per pound of a cantaloupe? What is the equilibrium quantity of cantaloupes produced? Show your work graphically, numerically, and explain. P = 120 - 3Qd P = 5Qs P P = 5Qs 5Qs = 120 - 3Qd 120 5Q = 120 - 3Q 8Q = 120 -3 5 Q E = 120 / 8 = 15 1 1 P E = 5 x 15 = $75 $75 = P E Market Equilibrium : Qd = Qs No shortages, no surpluses P = 120 - 3Qd Horizontal D intercept 0 = 120 - 3Q 3Q = 120 0 Q E 40 Q Q = 40 15 (b) Indicate whether each of the following will shift the demand curve for cantaloupe melons to the left, to the right, or have no effect on it: (1) a report by the U.S. Surgeon-General that cantaloupes cause cancer.
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Unformatted text preview: P Í Í Í D D 1 0 Q Decrease in tastes and preferences for cantaloupes. (2) an increase in the price of honeydew melons. 2 P Î Î Î D 1 D Q If honeydews are a substitute, the demand for cantaloupes increases. If honeydews and cantaloupes are not related Î not a substitute, then no change in demand for cantaloupes. (3) an increase in per capita income. P Î Î Î D 1 D 0 Q If cantaloupes are a superior/normal good Î increase in demand. No change in cantaloupe demand if cantaloupes are a neutral good. Decrease in demand for cantaloupes if cantaloupes are an inferior good. (4) an increase in the wages of workers picking cantaloupes. P Î Î Î D 1 D 0 Q Higher wages Î Increase income Î Increase in demand if cantaloupes are a superior/normal good....
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This note was uploaded on 10/26/2009 for the course ECON 180-004-20 taught by Professor Bresnock during the Fall '09 term at UCLA.

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Markets4a - P Í Í Í D D 1 0 Q Decrease in tastes and preferences for cantaloupes(2 an increase in the price of honeydew melons 2 P Î Î Î D 1

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