Question

In 12/2010, the price of chicken egg in Canada was $1.25 per dozen and 51 million dozen were sold. During 2011, chicken feed became more costly, causing the price of eggs to change to $1.40 in 12/2011, with 48 million dozen sold.

a) With the information above, can we estimate a supply equation? Can we estimate a demand equation? Why?

b) If possible, estimate a linear supply and/or demand equation.

Answer 1

- $1.25 2010 canada @gg I, 51 milli Demand 2011 canada egs Canada egg al $1.40 Demand s 48 million S. Price 1.25 18 millo Simillion a quantity

(a) With the given information we can estimate an equation for the demand curve because there is a movement along the demand curve. The change in the price level caused a change in the demand, therefore, an equation can be determined.

The equation for the supply curve cannot be determined because there is a shift in the supply curve to the left, due to the change in the cost of the production, which is an external factor. Therefore, the supply curve equation cannot be determined.

(b) The demand curve equation can be determined as follows,

Demand Equanie : P = a - bq is when When price price $ 125 } $ 1.40 the the sl millim, 48 million quantity is quantity is Therefore, 1.25 - a - Sib 1.40a - 986 - - + -0.15 = -36 - I be 0.05 a = 1.25 + SI (6) a = 1.25 + (SIX 0.05) a = 3.8 linear demand equation therefore, a will be, p= 3.8 -0.05 g that i. 10.0sq + p = 3.8