Bu224 Unit 3 Assignment

Problem 1:

Suppose that the supply schedule of Belgium Cocoa beans is as follows:

Price of cocoa beans (per pound) | Quantity of cocoa beans supplied (pounds) |

$40 | 700 |

$35 | 600 |

$30 | 500 |

$25 | 400 |

$20 | 300 |

Suppose that Belgium cocoa beans can be sold only in Europe. The European demand schedule for Belgium cocoa beans is as follows:

Price of cocoa beans (per pound) | Quantity of Belgium cocoa beans demanded (pounds) |

$40 | 100 |

$35 | 300 |

$30 | 500 |

$25 | 700 |

$20 | 900 |

(a) Draw the demand curve and the supply curve for Belgium cocoa beans. What are the equilibrium price and quantity of cocoa beans from Belgium?

The equilibrium price of cocoa beans is $30 and the equilibrium

quantity is 500 pounds. It is the point in the graph where the supply and demand curves intersect.

Now suppose that Belgium cocoa beans can be sold in the U.S. The U.S. demand schedule for Belgium cocoa beans is as follows:

Price of cocoa beans (per pound) | Quantity of Belgium cocoa beans demanded (pounds) |

$40 | 200 |

$35 | 400 |

$30 | 600 |

$25 | 800 |

$20 | 1000 |

(b) What is the demand schedule for Belgium cocoa beans now that U.S. consumers can also buy them?

Price of Belgium cocoa beans | Quantity of Belgium cocoa beans demanded | Quantity of Belgium cocoa beans demanded | Total Demanded |

(per pound) | (pounds) | (pounds) | (pounds) |

$40 | 200 | 100 | 300 |

$35 | 400 | 300 | 700 |

$30 | 600 | 500 | 1100 |

$25 | 800 | 700 | 1500 |

$20 | 1000 | 900 | 1900 |

Draw a supply and demand diagram that illustrates the new equilibrium price and quantity of cocoa beans from Belgium.

What will happen to the price at which Belgium plantation owners can sell cocoa beans?

What will happen to the price paid by European consumers?

What will happen to the quantity consumed by European consumers?

The new equilibrium price is $35 and the new equilibrium quantity is 600 pounds, which can be seen...