Supply and demand questions 1 suppose that the price of...

SUPPLY AND DEMAND QUESTIONS 1. Suppose that the price of sugar increases. What would happen to the equilibrium price and quantity in the market for Kit Kat chocolate? Explain your answer by making references to a Supply & Demand Curves that you have drawn and their Equilibriums. 2. Suppose that a company invents a better machine for mixing the ingredients to make chocolate candies, but the price of cocoa rises while the price of sugar falls. What would happen to the equilibrium price and quantity in the market for Milky Way chocolate? 3. Suppose the equation for demand can be expressed as P = 120 - 1.25Q (P = Price of a good and Q is the Quantity of the good demanded). The equation for supply can be expressed as P = 1.75Q. a. What is the Quantity Demanded at a Price of $80? (Show All Your Work) b. Find the equilibrium price and quantity (Show All Your Work)

Transcript

00:01 So here we've got a rapid fire set of questions about supply and demand, right? so as usual here, we're asked about markets.

00:07 Markets are stories about quantity and price, downward sloping demand, upward sloping supply.

00:14 And here we've got what is a increase in sugar increase in input prices.

00:22 Sugar is an input price, input to kit katz.

00:26 So the price of sugar going up is going to make it more expensive to produce.

00:30 Kit katz.

00:31 So that means that suppliers need a higher price.

00:36 That means that the supply curve is shifting up.

00:39 And that means we're moving from an original equilibrium a up to this new equilibrium b, which means that the price is going up and the quantity is also going up.

00:49 Two, we have a very similar thing, right? so now we are again thinking about a market, quantity and price, demand, and supply, and we have some things that are happening.

01:02 So there are two things that happening.

01:04 First of all, there's a three things.

01:07 Oh, my god, this one is ridiculous.

01:11 So one, there's a better machine, and that better machine is going to increase supply, right? the better machine makes it cheaper for the companies to produce.

01:25 You're going to get an increase in supply, but now we're going to get a price of cocoa rises while the price of sugar falls.

01:37 So this is kind of confusing.

01:39 Two, we have cocoa and sugar are both inputs, right? you use sugar and cocoa, so these things are sort of going in opposite directions, right? so you have an input price goes up and and i think what they mean here is the three is the sugar in a is back to original value.

02:12 So here you've got another increase in input prices.

02:16 So this is going to shift the supply curve back.

02:19 So here you don't know what's going to happen, right? the answer is unclear...

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