Unit 3 Homework

Topics: Supply and demand, Inverse demand function, Demand curve Pages: 4 (720 words) Published: November 8, 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?

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.

The new equilibrium price and quantity is approximately $38/650 pounds…

What will happen to the price at which Belgium plantation owners can sell cocoa beans?

The price will go up.. Considering the new equilibrium price and quantity with the total demand and leaving all three curves (Europe, Us and Total Demands) I can see that price will go up...
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