In a small town, the market for fresh strawberries operates perfectly competitively. The demand and supply for strawberries in this town are governed by the following equations:
Demand Equation: \( Q_D = 60 - 5P \)
Supply Equation: \( Q_S = -20 + 10P \)
where \( Q_D \) and \( Q_S \) are the quantity demanded and supplied respectively, and \( P \) is the price of strawberries per pound.
Determine the equilibrium price and quantity.
Draw and label the market equilibrium price and quantity as well as consumer surplus and producer surplus.
Suppose a disease affects the strawberry crop, reducing the supply. The new supply equation is: \( Q_S = -40 + 10P \). Calculate the new equilibrium price and quantity, and illustrate the changes on your graph.
If the price of strawberries increases from $4 to $5, calculate the price elasticity of demand using the difference method.
Calculate the consumer surplus and producer surplus at the initial equilibrium.
In a medium-sized city, the market for notebooks is perfectly competitive. The demand and supply for notebooks are described by the following equations:
Demand Equation: \( Q_D = 250 - 25P \)
Supply Equation: \( Q_S = -30 + 20P \)
where \( Q_D \) and \( Q_S \) are the quantity demanded and supplied respectively, and \( P \) is the price of a notebook in dollars.
Determine the equilibrium price and quantity.
Draw and label the market equilibrium price and quantity as well as consumer surplus and producer surplus.
Calculate the price elasticity of demand using the difference method if the price decreases from $8 to $7.
Calculate the consumer surplus and producer surplus at the initial equilibrium.