Question

The market supply of lettuce in a small town is shown in the table below.

Supply of Lettuce

	Quantity of Lettuce Supplied (heads)
Price (dollars per head)	Initial	New
$2.00	600
1.50	500
1.00	400
0.50	300

Instructions: Enter your answers as a whole number.

a. Suppose an increase in the cost of water decreases production of lettuce heads by 15% at every price. Complete the new supply schedule in the table above.

b. At a price of $1.50 per head of lettuce, the original quantity supplied was  heads of lettuce and the new quantity supplied is  heads of lettuce.

Answer 1

(a)

It has been stated that an increase in the cost of water has decreased the production of lettuce heads by 15% at every price.

For instance, at price of $2 per head, 600 heads of lettuce supplied.

Now, production is decreased by 15%.

New quantity supplied = 600 - (600 * 0.15) = 600 - 90 = 510

So, now, at price of $2 per head, 510 heads would be supplied.

Similarly, new quantity supplied can be calculated at other prices.

Following is the complete table -

Price	Initial Quantity Supplied	New Quantity Supplied
$2.00	600	510
$1.50	500	425
$1.00	400	340
$0.50	300	255

(b)

At a price of $1.50 per head of lettuce, the original quantity supplied was 500 heads of lettuce and the new quantity supplied is 425 heads of lettuce.