Question

In: Advanced Math

In June 2001 the retail price of a 25-kilogram bag of cornmeal was $8 in Zambia;...

In June 2001 the retail price of a 25-kilogram bag of cornmeal was $8 in Zambia; by December the price had risen to $11.† The result was that one retailer reported a drop in sales from 14 bags per day to 2 bags per day. Assume that the retailer is prepared to sell 4 bags per day at $8 and 16 bags per day at $11. Find linear demand and supply equations, and then compute the retailer's equilibrium price.

Solutions

Expert Solution

Retailer price:

The total price charged for a product sold to a customer, which includes the manufacturer's cost plus a retail markup.

Equilibrium price:

When the supply and demand curves intersect, the market is in equilibrium. This is where the quantity demanded and quantity supplied are equal. The corresponding price is the equilibrium price.

Given that:

The retail price of 25 kg bag of cornmeal =$8

And in December price rises to $11.

This results in drop of sale from 14 to 2 bags/day.


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