# Question 2: Assume the current price of corn chips is \$2 per packet. The demand elasticity is 1 (… 1 answer below »

Question 2: Assume the current price of corn chips is \$2 per
packet. The demand elasticity is 1 (ignoring the negative sign) and
current consumption (i.e. quantity demanded) is 40 million packets
per week. Suppose that the manufacturer raises the price of corn
chips to \$4 per packet. a) Derive the demand equation. b) What will
happen to weekly consumption as price increases to \$4? c) Suppose
the supply equation is P=2+Q. Find out the market equilibrium price
and equilibrium quantity. d) Given the above supply and demand
equations, calculate the surpluses for both consumer and producer.
e) Now suppose the supply curve shifts and the equation of new
supply curve is P=4+Q. Do you think market exist?

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