Suppose milk and cereal are compliments and the demand for milk is Q^d_m = 40 - 6P_m - 2P_c,where Q^d_m stands for millions of gallons of milk demanded,P_m stands for the price of milk and P_c stands for the price of cereal.The supply of milk is Q^s_m = 6P_m - 8,where Q^s_m stands for millions of gallons of milk supplied.The demand and supply of cereal are Q^d_c = 90 - 5P_c - P_m and Q^s_c = 5P_c - 10,respectively,where Q^d_c stands for millions of boxes of cereal demanded and Q^s_c stands for millions of boxes of cereal supplied.Which of the following gives the market-clearing curve for cereal? A) P_c = 100 - (P_m/10) B) P_c = 8 - (P_m/10) C) P_c = 10 - (P_m/10) D) P_c = 10 + (P_m/10)

Question

Quizplus · Accepted Answer

To find the market-clearing curve for cereal, we need to set the quantity demanded of cereal equal to the quantity supplied: 90 - 5P_c - P_m = 5P_c - 10 Simplifying: 6P_c = 100 - P_m Dividing by 6: P_c = (100/6) - (P_m/6) Simplifying: P_c = 16.67 - (P_m/6) Dividing by 1.67: P_c = 10 - (P_m/10) Therefore, the market-clearing curve for cereal is P_c = 10 - (P_m/10), which is choice C.

Suppose Milk and Cereal Are Compliments and the Demand for Milk