Question

Suppose that an estimated monthly

supply functions for avocados in the U.S. is given by:

Q = 100 + 20 p - 40 pr

where

Qs is the quantity of avocados supplied in tons per year;

p is the price of avocados in US dollars per kilogram;

Pf is the price of fertilizer (an input) in dollars.

And suppose further that

Pf is $0.25 per kllogram.

Answer the following questions.

a) Draw the supply curve for avocados. You should be very precise and accurate in your draw-

ing especially when showing the price and quantity intercept values on the diagram.

b) Calculate the responsiveness of a change in the quantities supplied to a unit change in the

price (i.e., show how the quantities supplied would change if the price changes by a unit).Ex-

plain your answer.

c) Calculate the slope of the supply curve. What does it tell us regarding the relationship

between the price of avocados and the quantities supplied. Explain your result.

d) How would the supply curve shift if the price of fertilizer rises from $0.25 to $0.50 per

kilogram Show the change on a new diagram.