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In: Economics

2) When the price of a certain product is $40, then 25 items can be sold....

2) When the price of a certain product is $40, then 25 items can be sold. When the price of the same product costs $20, then 185 items can be sold. On the other hand, when the price of this product is $40, then 200 items will be produced. But when the price of this product is $20, only 100 items will be produced.

a) Find the supply and demand functions for this product (assume for simplicity that the functions are linear).
b) Find the equilibrium price and quantity.
c) Compute the consumer and producer surplus at the equilibrium price.

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Expert Solution

Rahul Sunny answered 7 months ago
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