Question

The recent increase in the cost of poultry feed in the country has been forcing farmers to increase the price of eggs. Egg market analyst Bryan estimated the market demand and supply for the average household in the table below

Price	Qd	Qs
100	5	40
80	15	25
70	20	20
60	25	15
40	40	10

To address the low demand, that result from the increase in price he is recommending that farmers lower price to keep their commodities from going to waste.

Use the information in the Table 1 to

1. Illustrate the demand and supply schedule graphically on one graph.
2. Identify the equilibrium price and quantity.
3. Use the mid-point formula to calculate price elasticity of demand for eggs when the price decrease from $60 to $40.
4. If the farmers lower price to keep their commodities from going to waste what would be the likely impact on the total revenue of the farmers. Give reason for your answer.
5. Suppose Sandra’s receives a weekly income of $2000 which she spend only on eggs and bacon. The price of an egg is $50 and the price of bacon is $100.
   1. Write down the algebraic equation for Sandra’s budget constraint.
6. 2. Illustrate the Sandra's budget constraint and indifference curve on the same graph to show the satisfaction maximizing choice associated with two products.
   3. Use the utility maximizing rule explains how Sandra’s decide to allocate her money between these two products.

Answer 1