Using the information in Question 3.6, determine how the equilibrium price and quantity of processing tomatoes change if the price of tomato paste falls by 10%.Question 3.6Green et al. (2005) estimated the supply and demand curves for California processing tomatoes, which are used to produce tomato paste. The supply function is ln(Q) = 0.2 + 0.55 ln(p), where Q is the quantity of processing tomatoes in millions of tons per year and p is the price in dollars per ton. The demand function is ln(Q) = 2.6 – 0.2 ln(p) + 0.15 ln(pt), where pt is the price of tomato paste in dollars per ton. In 2002, pt = 110. What is the demand function for processing tomatoes, where the quantity is solely a function of the price of processing tomatoes? Solve for the equilibrium price and quantity of processing tomatoes (explain your calculations, and round to two digits after the decimal point). Draw the supply and demand curves (note that they are not straight lines), and label the equilibrium and axes appropriately.
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