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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 '07
 KAISER,H.M.
 Supply And Demand, retail price, retail demand, Farm Supply, price point elasticity

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