Principles of Economics: Problems: Utility and Spite and Envy: RMU and Cabo Vacations
Principles of Economics: Problems

Principles of Economics: 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.

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

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