a) Suppose a freeze in Florida wipes out 20% of the apple crop. How will this af

Question

a) Suppose a freeze in Florida wipes out 20% of the apple crop. How will this affect
the equilibrium price and quantity of pear? Assume that the apple and pear are substitute
to each other.

b) When the price of paper increases from $100 to $120 per ton, the quantity
supplied increases from 200 to 210 tons per day. The price elasticity of supply is?

c) Suppose the price elasticity of demand for vanity plates in your state is 0.60.
The initial price is $20 and the initial quantity is 1,000 plates per week. Suppose the state increases the prices by 10%. Predict the new quantity per week and total revenue per week.

Explanation / Answer

A.) The equilibrium price and quantity of pears should increase, because the price and quantity of apples will icnreasea nd decrease respectively. B.) 0.25 Price elasticity is the percentage change in supply / percentage change in price = 5%/20% = 0.25 C.) Q = 60, Revenue = $20,680 10% * 0.6 = 6% decrease in quantity 1000 * 6% = 60 less plates Revenue = $22 * 940 = $20,680

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