Problems: Supply and Demand: Sunnydale Lattes

Suppose that, on and near the U.C. Sunnydale campus, the weekly supply curve for lattes is given by the equation Q = max(1000 P - 2000, 0) : nobody makes any lattes unless the price is above $2/latte, and for each $1 the price is above $2 an extra 1000 lattes are made.




Suppose that customers have $10,000/week to spend on lattes. Draw the supply curve and the demand curve.


What is the equilibrium price of lattes? What is the equilibrium quantity of lattes?

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Published on March 13, 2014 18:38
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