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Let the Demand and Supply for Two Linked Products, Say

Question 2

Multiple Choice

Let the demand and supply for two linked products, say corn and soy, be the following: Qcd= 12 - 2pc + ps; Qcs = 4+pc; Qsd = 6-4ps + pc; Qss = 4 + ps. 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 = 18 - 2pc + ps. If the price of soy does not adjust in response to this shift, what is the new equilibrium price of corn?


A) pc = 2
B) pc = 1
C) pc = 3
D) pc = 5

Correct Answer:

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