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Economics demand and supply

Each question needs just a few lines to each question. I will use the answers to confirm and help me understand each question and the concept.

1. Analyze what would happen to equilibrium price and quantity in the market for Pepsi if the following occurred (be sure to indicate WHY it happens as well):

a. The price of Coke decreases.

b. Average household income falls from $50,000 to $43,000

c. There are improvements in soft-drink bottling technology.

d. The price of sugar increases and the Pepsi launches an extremely successful advertising campaign.

2.
a. Analyze the following demand and supply equations. What is market equilibrium price? What is market equilibrium quantity?

Demand: Qd = 100 - 4P
Supply: Qs = 10 + 6P

b. Assume the government places a price ceiling at $7 in the market. What is quantity demanded? What is quantity supplied? Is there a shortage or a surplus?

3. Using the diagram below, answer the following questions:

Diagram on the attachment below

a. How much is the per-unit tax on cigarettes?

b. What price do consumers pay after the tax?

c. How much tax revenue is collected?

d. What is the amount of deadweight loss?

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Solution Preview

Economics Demand and Supply
1. Analyze what would happen to equilibrium price and quantity in the market for Pepsi if the following occurred (be sure to indicate WHY it happens as well):

a. The price of Coke decreases.
Since Coke and Pepsi are substitutes, decrease in price of Coke would lead to a downward shift in demand curve for Pepsi. The quantity demand for Pepsi would decrease.

b. Average household income falls from $50,000 to $43,000
With decrease in income, demand for Pepsi depends on ...

Solution Summary

Analysis of problems related to demand and supply are provided.

$2.19