Question

1. Suppose that the market for bananas in Ithaca on an average weekday is given by the following equations:

demand: P = 120 – Q

supply: P = 30 + 2Q

where P is the price of a bushel in dollars and Q is the quantity in bushels.

a. What is the equilibrium price and quantity? Show graphically

b. Assume that the National Institutes of Health issues a study showing that bananas reduce the risk of cancer. The demand for bananas increases to:

demand’: P = 150 - Q

At the original equilibrium price, is there a shortage or a surplus? Of how much?

c. What is the new equilibrium price and quantity? Show graphically.

Answer #1

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- please use keyboard (don't use handwriting)
- please use your own words don’t copy and paste (no
plagiarism)
- no pictures containing text
Problem 2
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QS = 2p − 2
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