# Sweet tooth sal always consumes 2 containers of jam

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“Sweet-Tooth” Sal always consumes 2 containers of Jam for each loaf she consumes, while Sourdough Slim consumes 3 loaves for each container of Jam he consumes. (a) With y for Jam and x for Bread, give the equation for the consumption patterns of each consumer, and determine how much Bread and how much Jam each con- sumes per period. (b) If the price of Bread doubles, so that the budget line facing each is now given by y = 120 –(4/3) x, determine how much Bread and how much Jam each now con- sumes per period. Compare your results for (a) and (b) for “Sweet-Tooth” Sal and Sourdough Slim, and draw a graph including both solutions. 8. Each of two Cournot duopolist sellers sets his output ( Q 1 or Q 2 ) to maximize profits, given the output of the other ( Q 2 or Q 1 , respectively). Total industry output Q is the sum of their outputs: Q = Q 1 + Q 2 . The marginal cost of production of duopolist 1 is higher than that of duopolist 2. Their “reaction curves,” which tell what each will produce given the output of the other, are as follows: Duopolist 1: Q 1 = R 1 ( Q 2 ) = 35 – 0.5 Q 2 Duopolist 2: Q 2 = R 2 ( Q 1 ) = 40 – 0.5 Q 1 . Calculate the amounts each will produce, and total industry output.
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• Fall '12
• Danvo
• Equations, Elementary algebra, linear equation systems, Equation Systems

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