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2009Problem_Set_6

2009Problem_Set_6 - AEM 4150 Price Analysis Fall Semester...

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AEM 4150 Price Analysis Fall Semester 2009 Homework Assignment 6 This assignment is due at the beginning of class on Tuesday, October 27, 2009. Question 1 The following are supply and demand curves for potatoes at the farm and retail level: (1) Retail Demand ( D r ) P r = 50 - 0.75Q (2) Marketing Margin (M) M = 32 - 0.48Q (3) Farm Supply (S f ) P f = -20 + 1.43Q In the above, P r is the U.S. average retail price per sack, Q is total quantity of sacks marketed (in millions of sacks), P f is the average price per sack received by potato growers, M reflects cost of shipping, wholesale, and retail operations. The supply equation predicts the quantity produced for a given P f after producers have had time to adjust production levels to that price. Answer the following ( please show your work and circle your answers where appropriate ). (a) (1 point) Graph the retail demand, and farm supply curves. Label all curves and axes. (b) (2 points) Calculate the equation for the derived demand function facing growers (D f ) and the equation for the derived retail supply function (S
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