| Question |
Suppose the daily demand curve for flounder at Cape May is given by QD = 1,600 – 600P, where QD is demand in pounds per day and P is price per pound. a. If fishing boats land 1,000 pounds one day, what will the price be? b. If the catch were to fall to 400 pounds, what would the price be? c. Suppose the demand for flounder shifts outward to QD = 2,200 – 600P How would your answers to part a and part b change? d. Now assume that Cape May fishermen can, at some cost, choose to sell their catch elsewhere. Specifically, assume that the amount they will sell in Cape May is given by QS = –1,000 + 2,000P for QS ? 0 Where QS is the quantity supplied in pounds and P is the price per pound. What is the lowest price at which flounder will be supplied to the Cape May market? e. Given the demand curve for flounder, what will the equilibrium price be? f. Suppose now demand shifts to QD = 2,200 – 600P What will be the new equilibrium price? g. Explain intuitively why price will rise by less in part f than it did in part c. Graph all your results. |
