Sub: Economics

Topic: Micro Economics

Question: Demand and supply.

ClassOf1 provides exert guidance for College, Graduate and High school homework and live online tutoring on subjects like Finance, Marketing, Statistics, Economics and others. Check out more solved problems in our Solution Library.

=S71=M72:M121 Qd = 22 + 0.1 Y - 10Pb + 5 Pc And the supply of beef is given by: Qs = -400 + 500Pb - 200 Pf where Qd denotes quantity of beef demanded, Qs denotes quantity supplied, Pb denotes price, of beef, Y denotes per capita income, Pc denotes the price of chicken, and Pf denotes the price of feed used for growing beef. Assume further that: Y = $10,000, Pc = $2.00, Pf = $1.00 a. What is the equilibrium price and quantity of beef? b. What is the point price elasticity of demand for beef when its price is equal to $4.00, using the demand curve you derived to answer (a) above. c. If the price of chicken increases to $3.00, what happens to the demand curve for beef? What is the equilibrium price and quantity of beef? d. Compute the cross elasticity of demand and indicate whether beef and chicken are substitutes or complements.

Solution:
Assume the demand for beef is given by Qd = 22 + 0.1 Y 10Pb + 5 Pc And the supply of beef is given by: Qs = -400 + 500Pb 200 Pf
www.classof1.com

*The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not for
submitting the same in lieu of your academic submissions for grades.

Sub: Economics

Topic: Micro Economics

where Qd denotes quantity of beef demanded, Qs denotes quantity supplied, Pb denotes price, of beef, Y denotes per capita income, Pc denotes the price of chicken, and Pf denotes the price of feed used for growing beef. Assume further that: Y = $10,000, Pc = $2.00, Pf = $1.00 a. What is the equilibrium price and quantity of beef? Y = $10,000 Pc = $2.00 Pf = $1.00

Qd = 22 + 0.1 Y 10Pb + 5 Pc Qs = -400 + 500Pb 200 Pf 22 + 0.1 Y 10Pb + 5 Pc = -400 + 500Pb 200 Pf 22 + 0.1 * 10,000 10Pb + 5 * 2 = -400 + 500Pb 200 * 1 22 + 1000 10Pb + 10 = -400 + 500Pb 200 510Pb = 1632 Pb = $3.2 Therefore, Qd = 22 + 0.1 Y 10Pb + 5 Pc Qd = 22 + 0.1 * 10000 10 * 3.2 + 5 * 2 Q = 1000 If you like to download the complete solution , visit our solution library by copying to your browser the following link
ClassOf1 provides exert guidance for College, Graduate and High school homework and live online tutoring on subjects like Finance, Marketing, Statistics, Economics and others. Check out more solved problems in our Solution Library. www.classof1.com

*The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not for
submitting the same in lieu of your academic submissions for grades.