The demand function for pork is Qs 300-100P+0.02INCOME, where Qa is the tos of p

Question

The demand function for pork is Qs 300-100P+0.02INCOME, where Qa is the tos of pork demanded in your city per week, P is the price of a pound of po is the average household income in the city. The supply function for pork is -200 + 150P-10COST, where Qs is the tons of P is the price of a pound of pork, and COST is the cost of pig food. Suppose INCOME 1S rk, and INCOME per week pork supplied in your city $50,000 and COST is $4. is case, what would the equilibrium price of pork be? What would the equilibrium quantity of pork would be? Show work. b. Suppose INCOME falls to $40,000 and COST does not change. What would the new equilibrium price of pork be? What would the new equilibrium quantity of pork be?

Explanation / Answer

a) replace income and cost values in Qd and Qs:

Qd = 300 - 100P + 0.02 x 50000 = 1300 - 100P

Qs = 200 + 150P - 10 x 4 = 160 + 150P

At equilibrium Qd = Qs: 1140 = 250P

P = 4.56 and Q = 844

b)

Qd = 300 - 100P + 0.02 x 40000 = 1100 - 100P

Qs = 200 + 150P - 10 x 4 = 160 + 150P

At equilibrium Qd = Qs: 940 = 250P

P = 3.76 and Q = 724

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