In some markets, demand can be approximated by Q = 50?5P + 10Ywhere Q is quantity, P price per unit, and Y = buyers’ income. Supply can be approximated by Q =?5 + 10P.
a.
If Y = 20, what is equilibrium price and output?
b.
If Y rises to 25, what is the new equilibrium price and output?
?
What will be an ideal response?
a Equate the supply and demand equations, substituting 20 for Y:50?5P + 10(20) =?5 + 10P 50 + 200 + 5 = 15P P = 17, Q = 165b. Equate the supply and demand equations, substituting 25 for Y: 50?5P + 10(25) =?5 + 10P 50 + 250 + 5 = 15P P = 20.33, Q = 198.33
You might also like to view...
Which of the following is TRUE for the perfectly competitive firm?
A) Price and MR are always equal. B) AR is less than price. C) AR is more than price. D) Price elasticity of demand is equal to 1.
If income redistribution policy is based on the relative concept of poverty, the war on poverty
a. will be won quite soon. b. is, by definition, unwinnable. c. has not helped at all. d. has already been won.
Freely functioning markets
A. have no need for government intervention. B. may be unfair due to significant income disparities that result. C. always produce an efficient allocation of resources. D. All of the above are correct.
In the above figure, the slope across the arc between b and c is
A) 1/2. B) 2/3. C) 1. D) 2.