Equilibrium Price You can sell 90 pet chias per week if they are marked at...

Equilibrium Price You can sell 90 pet chias per week if they are marked at $1 each, but only 30 each week if they are marked at $2/chia. Your chia supplier is prepared to sell you 20 chias each week if they are marked at $1/chia, and 100 each week if they are marked at $2 per chia.

a. Write down the associated linear demand and supply functions.

b. At what price should the chias be marked so that there is neither a surplus nor a shortage of chias? HINT [See Example 4.]

Example 4:

You run a small supermarket, and must determine how much to charge for Hot’n’Spicy brand baked beans. The following chart shows weekly sales figures (the demand) for Hot’n’Spicy at two different prices, as well as the number of cans per week that you are prepared to place on sale (the supply) at these prices.

a. Model these data with linear demand and supply functions. (See Example 4 in Section 1.2.)

b. How do we interpret the slope and q intercept of the demand equation? How do we interpret the slope of the supply equation?

c. Find the equilibrium price and graph demand and supply on the same set of axes. What happens if you charge more than the equilibrium price? What happens if you charge less?