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 is free to adjust in response to this shift, what are the new equilibrium prices of corn and soy?
A) pc = 5.14; ps =1.43
B) pc = 6.20; ps =2.15
C) pc = 2.50; ps =2.50
D) pc = 4.35; ps =2.00
Correct Answer:
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