The Local Lemon Market Has the Following Supply and Demand

question 59

Essay

The local lemon market has the following supply and demand relationships:
QD = 100 - 5p - pₒ + 2I
QS = 4p
where p is the price of lemons (per pound),Q is the quantity of lemons in pounds,I is the average consumer income,and pₒ is the price per pound of oranges.Derive the equilibrium price and quantity of lemons as functions of the price of oranges and average consumer income.Use the calculus method of comparative statics to compute the effects of income and the price of oranges on the equilibrium price and quantity of lemons.

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Definitions:

Unconditional Promise

An unconditional promise is a firm commitment or pledge made by one party to another, without any stipulations or conditions attached.

Check-clearing Process

The method through which banks collect and settle the amount of a check, transferring funds from one account to another.

Movability

The characteristic of an asset that allows it to be transferred or moved from one location to another.

Commission

A fee or percentage of a transaction value paid to an agent or company for facilitating a service, such as a sale or real estate transaction.