Suppose the daily demand for soda is given by P = 4 – (2/3)Q and the daily supply of soda is given by P = 1 + (1/3)Q, where P is the dollar price of a can of soda and Q is the number of cans of soda (in thousands). a. Sketch the demand curve and the supply curve.
Instructions: Use the tools provided to draw the demand and supply curves. Plot each end point (4 points total).
b. How many cans of soda are bought and sold each day? What is the equilibrium price of soda?
Equilibrium quantity: cans
Equilibrium price: $ per can
c. What is the price elasticity of demand for soda at the equilibrium price?
d. What is the price elasticity of supply for soda at the equilibrium price?
e. If the price of one of the inputs used to make soda increases, then what will happen to consumers' total expenditure on soda?
It will decrease.
It will remain unchanged
It will increase.