What is the equilibrium quantity of sweet kiwifruit
Course:- Econometrics
Reference No.:- EM131134725

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Equilibrium in the Kiwifruit Market. Consumers are willing to pay 10 cents for a sour kiwifruit and 30 cents for a sweet kiwifruit. The minimum supply price for sour kiwifruit is 6 cents and the minimum supply price for sweet kiwifruit is 18 cents. The slope of each supply curve is 1 cent per thousand kiwifruit. (Related to Application 2 on page 624.)

a. Suppose consumers initially expect a 50 50 mix of sweet and sour kiwifruits. Is this an equilibrium? Illustrate with a graph.

b. Suppose consumers are pessimistic, expecting all sour kiwifruit. Is this an equilibrium? Illustrate with a graph. What is the price of kiwifruit?

c. Suppose the state outlaws sour kiwifruit, and they disappear from the market. What happens to the equilibrium price of kiwifruit? What is the equilibrium quantity of sweet kiwifruit?

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