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Let the Demand and Supply for Two Linked Products, Say Qcd=12Q _ { c } { } ^ { d } = 12

Question 2

Multiple Choice

Let the demand and supply for two linked products, say corn and soy, be the following: Qcd=12Q _ { c } { } ^ { d } = 12 2pc+ps;Qcs=4+pc;Qsd=64ps+pc;Qcs=4+ps- 2 p _ { c } + p _ { s } ; Q _ { c } { } ^ { s } = 4 + p _ { c } ; Q _ { s } ^ { d } = 6 - 4 p _ { s } + p _ { c } ; Q _ { c } { } ^ { s } = 4 + p _ { s } . The superscript refers to "demand" (d) or "supply" (s) and the subscript refers to corn (c) or soy (s) . Now, suppose that the demand for corn shifts to Qcd=182pc+psQ _ { c } { } ^ { d } = 18 - 2 p _ { c } + p _ { s } . If the price of soy is free to adjust in response to this shift, what are the new equilibrium prices of corn and soy?


A) pc=5.14;ps=1.43p _ { c } = 5.14 ; p _ { s } = 1.43
B) pc=6.20;ps=2.15p _ { c } = 6.20 ; p _ { s } = 2.15
C) pc=2.50;ps=2.50p _ { c } = 2.50 ; p _ { s } = 2.50
D) pc=4.35;ps=2.00p _ { c } = 4.35 ; p _ { s } = 2.00

Correct Answer:

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