Answered: Using the supply and demand functions…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter5: Markets In Motion And Price Controls

Section: Chapter Questions

Problem 10P

See similar textbooks

Part 2

The demand function for coffee is

Q=8.5−p+0.01Y,

where Q is the quantity of coffee in millions of pounds per year, p is the price of coffee in dollars per pound, and Y is the average annual household income in high-income countries in thousands of dollars.

The coffee supply function is

Q=9.6+0.5p−0.2pc,

where

is the price of cocoa in dollars per pound.

Part 3

The equilibrium price of coffee is

p=$enter your response here

per pound

and the equilibrium quantity is

Q=enter your response here

millions of pounds per year.

(Enter your responses rounded to two decimal places.)

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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