MT445 Unit-2 Assignment

1. Explain what would happen to equilibrium price and quantity in the market for Pepsi if the following occurred (be sure to indicate WHY it happens as well):
a. The price of Coke decreases.
b. Average household income falls from $50,000 to $43,000
c. There are improvements in soft-drink bottling technology.
d. The price of sugar increases and the Pepsi launches an extremely successful advertising campaign.

2.  Use the following equations for demand and supply to solve for market equilibrium price and quantity:

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Demand: Qd = 100 – 4P
Supply: Qs = 10 + 6P

3. . Using the diagram below, answer the following questions:
a. How much is the per-unit tax on cigarettes?
b. What price do consumers pay after the tax?
c. How much tax revenue is collected?
d. What is the amount of deadweight loss?


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