Find in which direction has each of the variables changed

Reference no: EM13222384

In a popular ski resort town, the (inverse) demand for ski jackets is P=476-1.5Qd and (inverse) supply is P=80+.5Qs. Find the market equilibrium quantity and price for ski jackets.

Suppose that recent innovations in production techniques have led to a decline in the cost of GOR-TEX®, a fabric used in the production of waterproof outerwear. The innovation leads to a production cost savings of $30 per jacket. What is the new (inverse) supply equation? (HINT: Use a graph to help you determine how the new supply equation, which includes the new per-jacket production cost, should be derived. Think about the direction in which the inverse supply curve will shift by $30 and how to translate this shift into the equation representing supply.) Find the new equilibrium quantity and price for ski jackets; assume that demand for ski jackets remains the same. Compare the initial equilibrium quantity and price to the new equilibrium quantity and price, following the innovation and cost reduction. In which direction has each of these variables changed? Sketch a graph to illustrate the supply or demand shift for this situation and confirm that
your graph shows the directions of change in quantity and price that you have found.

Reference no: EM13222384

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