Question

(Chapter 16 in the book) Problem 7. The demand for olive oil is given by 120 - 4p, and the supply of olive oil given by 2p, -30, where pa is the price paid by consumers (demanders) and p, is the price received by producers (suppliers) measured in dollars per hundred gallons. Quantities demanded and supplied are in hundred-gallon units. (a) Draw the demand curve and the supply curve using different colors. (b) Write an equation that you need to solve to find an equilibrium price. (c) What is the equilibrium price of olive oil, pı? (d) What is the equilibrium quantity of olive oil, q.? (e) Label equilibrium price and quantity on your graph. (1) A terrible drought strikes olive-growing regions, and the supply curve for olive oil shifts to s' (p.) - 2p,-60. The demand curve stays the same. Draw the new supply curve on your graph. (9) What is the new equation that you need to solve to find an equilibrium price? (h) What is the new equilibrium price of olive oil, pa? () What is the new equilibrium quantity of olive oil, 92? () The government decides to help olive oil producers and consumers by paying a subsidy of $5 per hundred gallons of olive oil to producers. If pis the price paid by consumers, how much do producers get for one hundred gallons of olive oil with the subsidy (i.e. what is p, in terms of p, and the subsidy)? (k) What is the supply of olive oil with subsidy as a function of pa? (1) Write an equation that you need to solve to find an equilibrium price with the subsidy? (m) What are the equilibrium price paid by consumers and the equilibrium quantity under the subsidy? (n) Suppose the government paid the subsidy to consumers instead of producers. What would be the equilibrium price paid by consumers in terms of p, ? (0) What would be the equilibrium quantity under this scenario?

Answer 1

ds=2850 2 P-300s 20 am when doods 120-up = 20-30 90-6P P = 150 25 di og atostoco oty - 120-4126 = 20 9 On=120-up Neurigen n Os - 2P-60 , 20-4p=2P-60 180-6P (P=307 400