Let the Demand and Supply for Two Linked Products, Say $Q _ { c } d = 12$

question 49

Multiple Choice

Let the demand and supply for two linked products, say corn and soy, be the following: $Q _ { c } d = 12$ $- 2 p _ { c } + p _ { s } ; Q _ { c } { } ^ { s } = 4 + p _ { c } ; Q _ { s } ^ { d } = 6 - 4 p _ { s } + p _ { c } ; Q _ { s } { } ^ { 2 } = 4 + p _ { s }$ . 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 $Q _ { c } { } ^ { d } = 18 - 2 p _ { c } + p _ { s }$ . If we conduct a partial equilibrium analysis of the corn market, taking the price of soy as given, rather than a general equilibrium analysis, allowing the price of soy to change, we:

• A) underestimate the new price of corn.
• B) overestimate the new price of corn.
• C) correctly estimate the new price of corn.
• D) Overestimate the new price of soy.

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Definitions:

Ongoing Business

A company or commercial enterprise that continues to operate and engage in its activities, as opposed to one that is in the process of closing down or has ceased operations.

Noncompetition

An agreement, often within a contract, that restricts one party from competing directly with another party, usually after termination of the agreement.

Disaffirm

To disaffirm means to legally reject or void a contract or agreement, usually because of the incapacity or unfairness to one party involved.

Minor

An individual who is under the age of majority, legally considered as not yet fully adult and under the care of a parent or guardian.