Question

he Homework: Homework 2 Save Score: 0 of 1 pt 5 of 10 (10 complete) HW Score: 90%, 9 of 10 pt X Text Question 3.3 Question Help Using the supply and demand functions below, derive the demand and supply curves if Y = $55,000 and Pc - $11. What is the equilibrium price and quantity of coffee? The demand function for coffee is Q-8.5-P+0.01Y, where is the quantity of coffee in millions of pounds per year, p is the price of coffee in dollars per pound, and Y is wverage annual household income in high-income countries in thousands of dollars. The coffee supply function is Q-9.6+0.5p -0.2pc where pe is the price of cocoa in dollars per pound. The equilibrium price of coffee is pus per pound and the equilibrium quantity is Q- millions of pounds per year, (Enter your responses rounded to two decimal places.)

Answer 1

Demand function is Q = 8.5 - p + 0.01Y. Putting Y= 55,000 we get the following demand equation : Q = 558.5 - p.

Supply function is Q = 9.6 + 0.5p - 0.2p_c. Putting p_c= 11, we get the following supply function Q = 7.4 + 0.5p.

Equating the supply and demand equations, Q = 558.5 - p = 7.4 + 0.5p. Hence, p = 367.4.

Equilibrium price of coffee is $367.40 per pound.

Putting the above value in any of the functions, we get, Q = 558.5 - 367.4 = 191.10 millions of pounds.