Demand and Supply for Sunbest Orange Juice are both highly sensitive to changes

Question

Demand and Supply for Sunbest Orange Juice are both highly sensitive to changes in weather and other factors. In particular, the demand and supply functions take the following form:

QD=5M-25M*P-5M*PS+2000*Y+50000*T

QS=12M*P-100000*W-120000*i-150000*T

Where QD and QS represents quantities demanded and supplied respectively, P represents the Price of Sunbest, PSrepresents the price of soda, Y represents income, T represents average temperature, W is the price of labor (the wage), and i is the price of capital (the interest rate). Also, note that M stands simply for “Millions”

all Verizon LTE 3:49 PM Assignment%202.xlsx moodle.clarkson.edu Demand Scenarios Supply Scenarios Sheet3 Scenario Price of Sunbest (P) Price of Soda (Ps) Disposable Income(Y) Temperature(T 81.25 81 80.75 80.5 80.25 67500 66500 65500 64500 63500 62500 61500 60500 59500 58500 3.8 3.6 3.4 3.2 4.5 4.4 4.3 4.2 4.1 79.75 79.5 79.25 10 2.8

Explanation / Answer

1) The coeffeicient of income in the given demand function of the good is positive. Hnece the good is normal because positive sign shows that with increase in income the demand increases and vice versa which is a feature of normal good. Under normal good with increase in income the demand decreases.

The soda and the sunbest are compliments. Becasue the price of soda has negarive coefficient. the negative coeffeiceint implies that when price of soda increases then along with the demand of soda the demand of sunbest will also decrease as consumers will consume both good in pair.

2) Use the avalues given in the table and calculate the demand and supply values as follows -

the values of supply can not be calculated as the wage rate and interest rate are not provided.

And hence other parts are also cannot be asnwered.

Scenario P Ps Y T Qd 1 4.6 4.9 67500 81.25 4562500 2 4.4 4.8 66500 81 8050000 3 4.2 4.7 65500 80.75 11537500 4 4 4.6 64500 80.5 15025000 5 3.8 4.5 63500 80.25 18512500 6 3.6 4.4 62500 80 22000000 7 3.4 4.3 61500 79.75 25487500 8 3.2 4.2 60500 79.5 28975000 9 3 4.1 59500 79.25 32462500 10 2.8 4 58500 79 35950000

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