Let the Demand and Supply for Two Linked Products, Say

question 4

Multiple Choice

Let the demand and supply for two linked products, say corn and soy, be the following: Q_c^d= 12 - 2p_c + p_s; Q_c^s = 4+p_c; Q_s^d = 6-4p_s + p_c; Q_s^s = 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 - 2p_c + p_s. If the price of soy is free to adjust in response to this shift, what are the new equilibrium prices of corn and soy?

• A) p_c = 5.14; p_s =1.43
• B) p_c = 6.20; p_s =2.15
• C) p_c = 2.50; p_s =2.50
• D) p_c = 4.35; p_s =2.00

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