Question: 1

FRESH FOOD SURVEY

Coefficients
Intercept 8536.213882
Price -835.7223514
Advertising 0.592228496

Construct the demand equation:

𝑌 = 8536.213882 − 835.7223514 P + 0.592228496 Adv

A. Estimate sales when the price is $50 and advertising is $100,000, stating any assumption that
you need to make.
𝑌 = 8536.213882 − 835.7223514 P + 0.592228496 Adv
𝑌 = 8536.213882 − 835.7223514 (50) + 0.592228496 (100000)
𝑌 = 8536.213882 − 41786.11757 + 59222.8496
𝑌 = 25972.94591

B. If the firm charges $50 but increases advertising to $110,000, what conclusions can you derive
in terms of revenues and profits?

𝑌 = 8536.213882 − 835.7223514 P + 0.592228496 Adv

𝑌 = 8536.213882 − 835.7223514 (50) + 0.592228496 (110000)
𝑌 = 8536.213882 − 41786.11757 + 65145.13456
𝑌 = 31895.23087

Question: 2
The demand for dog treats is represented by the following equation.
QD =300-50P
Qs = - 100 + 150P
Determine equilibrium Quantity Demand, Quantity Supply and Price.
Answer:
Equilibrium is where;
Qd = Qs
300 − 50𝑃 = −100 + 150𝑃
300 + 100 = 150𝑃 + 50𝑃
400 = 200𝑃
𝑃=2
For equilibrium quantity demanded; QD =300-50P
𝑄𝑑 = 300 − 50𝑃
 𝑄𝑑 = 300 − 50(2)
𝑄𝑑 = 200

For equilibrium quantity supplied; Qs = - 100 + 150P

𝑄𝑠 = −100 + 150𝑃
𝑄𝑠 = −100 + 150(2)
𝑄𝑠 = 200

Question: 3
Mini Case Study
Shift in supply: good weather for salmon (trout) fishing
Price per Quantity supplied in Quantity supplied in Quantity
pound 1999 2000 demanded
$2.00 80 400 840
$2.25 120 480 680

$2.50 160 550 550

$2.75 200 600 450

$3.00 230 640 350

$3.25 250 670 250

$3.50 270 700 200

A. Draw a demand and supply model representing the situation before the economic event took
place.
 As the original equilibrium price and quantity for can be identified on the curve of Do and
So. Where actually Do and So intersect each other. Which means the original
equilibrium price is $3.25, a rate at which the supplier supply the salmon and buyer
agrees to buy. The original equilibrium quantity 250000 fishes.

B. Decide whether the economic event being analyzed affects demand or supply.
 As weather is considered to be the natural occurring condition, it affect the supply.

C. Decide whether the effect on demand or supply causes the curve to shift to the right or to the
left, and sketch the new demand or supply curve on the diagram.
 The supply curve will shift towards right and demand curve won’t shift. This is due to
good fishing conditions.
 New diagram:

D. Identify the new equilibrium and then compare the original equilibrium price and quantity to the
new equilibrium price and quantity.
 Actually the new equilibrium quantity increases from 250000 to 550000 fishes but with
decrease in new equilibrium price which is $3.25 to $2.50. Whereas the demand curve
did not move. Which means that the natural occurring condition increase the supply
curve and it shifted to the right

E. What does those numbers mean exactly?