Unit 3 Assignment

Topics: Supply and demand, Inverse demand function, Demand curve Pages: 4 (525 words) Published: November 27, 2012
Unit 3 Homework - Template

Problem 1:

Suppose that the supply schedule of Belgium Cocoa beans is as follows:

Price of cocoa beans(per pound)| Quantity of cocoa beans supplied(pounds)| \$40| 700|
\$35| 600|
\$30| 500|
\$25| 400|
\$20| 300|

Suppose that Belgium cocoa beans can be sold only in Europe. The European demand schedule for Belgium cocoa beans is as follows:

Price of Belgium cocoa beans(per pound)| Quantity of Belgium cocoa beans demanded(pounds)| \$40| 100|
\$35| 300|
\$30| 500|
\$25| 700|
\$20| 900|

a. Draw the demand curve and the supply curve for Belgium cocoa beans. What are the equilibrium price and quantity of cocoa beans from Belgium? . . . . . |

\$40

\$35

\$30

\$25

\$20
700 600 500 400 300

The equilibrium price and quantity of cocoa beans from Belgium is \$30.00 / 500 pounds

Now suppose that Belgium cocoa beans can be sold in the U.S. The U.S. demand schedule for Belgium cocoa beans is as follows:

Price of Belgium cocoa beans(per pound)| Quantity of Belgium cocoa beans demanded(pounds)| \$40| 200|
\$35| 400|
\$30| 600|
\$25| 800|
\$20| 1000|

b. What is the demand schedule for Belgium cocoa beans now that U.S. consumers can also buy them?

Price of Belgium cocoa beans| Quantity of Belgium cocoa beans demanded| Quantity of Belgium cocoa beans demanded| Total Demanded| (per pound)| (pounds)| (pounds)| (pounds)|
\$40 | 200| 100|  |
\$35 | 400| 300|  |
\$30 | 600| 500|  |
\$25 | 800| 700|  |
\$20 | 1000| 900|  |

Draw a supply and demand diagram that illustrates the new equilibrium price and quantity of cocoa beans from Belgium.

What will...