b Suppose a drought hits the province of British Columbia Th

b. Suppose a drought hits the province of British Columbia. This drought causes the quantity of apples produced to fall to 2. Assuming that all prices remain constant, the new Canadian GDP is $ the MacBook Air

Solution

GDP is computed as the sum of all the market value of goods produced. In this case, GDP is given by

GDP = Price of apples x quantity of apples + price of bananas x quantity of bananas + price of carrots x quantity of carrots

a) GDP is = 5x2 + 10x1 + 20x1.5 = 10 + 10 + 30 = $50.

b) New GDP is = 2x2 + 10x1 + 20x1.5 = 4 + 10 + 30 = $44

c) Let the price of carrot be P. We have 60 = 5x2 + 10x1 + 20xP = 10 + 10 + 20P = $60

20P = 40

P = 2.

Hence price of carrot is increased to 2.00 per carrot.