Explanation of Solution
The
The supply function of corn is shown below:
To calculate the equilibrium price, equate the supply and demand function.
The equilibrium price is $4.
Substitute the price ($4) in supply function to calculate the quantity of corn that can be bought and sold.
The quantity of corn that can be bought and sold is 11 units.
If the fuel price increases to $4.50 per gallon, the price corn will increase to $4.50. The quantity supply of corn is calculated as follows:
Price is $4.5.
Substitute this $4.5 to quantity supply.
The quantity supplied is 10 units.
Demand: Demand refers to the total value of goods and services produced in an economy during a period of time at particular price.
Supply: Supply is defined as the quantity of a commodity offered for sale at particular price during a period of time.
Equilibrium price and quantity: The intersecting point of demand and supply curve is the equilibrium point. The corresponding price and quantity of equilibrium points are the equilibrium price and
Want to see more full solutions like this?
Chapter 2 Solutions
Microeconomics
- What would the Supply Curve of houses in your city look like in the next 10 hours? In three months? Draw the diagrams.arrow_forwardIn August 2005, Hurricane Katrina damaged or destroyed oil platforms in the Gulf of Mexico, refineries along the Gulf coast, and the pipeline infrastructure that transports oil and gas to customers across the eastern United States. The winter of 2006 was unusually cold in many parts of the country. How did these events affect the market for natural gas? Use graphs to explain your points.arrow_forwardHow does the price of corn affect the supply of wheat?arrow_forward
- The figure shows the supply and demand for online music. Suppose that an economic downturn decreases household wealth and erodes consumer confidence. Move the supply and/or demand curves to reflect the primary effect this would have on the market for online music. You can assume that online music is a normal good. Also select the end result of equilibrium price and quantity. Equilibrium price Equilibrium quantity Price ($ per track) Quantity (number of tracks) Supply Demandarrow_forwardMarket: French Fries The equilibrium price has decreased and the equilibrium quantity is the same. Graph the market and give two reasons why this has happened that fit the graph. You do not need to identify the determinants for this question.arrow_forwardFor each case below, explain the effect on the supply and/or demand in the market for bicycles. Discuss the effects on the equilibrium price and quantity. a. The price of aluminum used to make bicycles increases. b. The average income of consumers decreases. Both (a) and (b) happen simultaneously. For 0.5 bonus points only: Show the effect of both events on a graph. Label all your curves and axes. C.arrow_forward
- What is a relevant example of how a change in the market (including information, preferences, technology, price of alternative goods, regulations, taxes, etc.) has shifted either the supply or demand of a good. How did this change affect the market equilibrium for that good or service? Explain. Next, find a relatively recent news article (within the past year) to support your finding (the news search feature in Google is helpful with this). If you cannot find an article specific to your example, you may find an article about another similar good or service. Talk about the article and its findings, then include the URL.arrow_forwardThe city of Rye has a large number of video arcades. The demand by patrons in thousands per week is Qd=200 - 2P and the supply is Qs= 2P where P is the price in cents charged to play a game. what is the Equilibrium number (quantity) of games played? What is the equilibrium price? draw a diagram showing the equilibrium in the markearrow_forwarduse verbal and graphical analysis to demonstrate the outcome. What will happen in the market for corn if a new crop rotation technique is discovered that allows corn to be grown more easily and the price of green beans, a substitute, decreases?arrow_forward
- The demand for rice is given by Q d=20-p and the supply is Q s=3p-20. a. Draw the demand and supply functions. Find the equilibrium quantity and price, and show them on the graph. b. Suppose due to drought the supply changes to 3p-30. The supply remains the same. Draw the new supply function on the same graph, and find the new equilibrium price and quantity. Has the demand increased or decreased? How did the equilibrium price and quantity change compared to part a.?arrow_forwardFarmer Brown plants both soybeans and corn. If the price of soybeans increases and the price of corn remains the W. same, what do you expect to happen to the amount of acreage that he devotes to planting each crop? How does your answer help to explain the law of supply? Does the supply curve of corn or soybeans shift? Use graphs to illustrate your answer. Your response should be at least 75-150 words (1-2 paragraphs) in length, including graphs with explanations. houo oinarrow_forwardFor each question start with a supply and demand graph of the market for tennis rackets. What happens to supply or demand in each scenario? Explain why and show on graph labeling the new equilibrium point.arrow_forward
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning