Question

The market for wool in the economy of Odessa is shown in the table below (note that quantities are given in tonnes per year).

Price ($)	100	200	300	400	500	600	700
Quantity demanded	160	140	120	100	80	60	40
Quantity demanded 2
Quantity supplied	10	20	30	40	50	60	70
Quantity supplied 2

Answer 1

Since there is no specific question you have asked, I guess you would like to get the equilibrium solution for the market. Hope this helps.

Thanks

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Given the information, the market can be represented by the following diagram, where D and S denote the demand curve and the supply curves respectively. The intersection of the demand curve and supply cure shown as point E represent equilibrium. The equilibrium price and quantity are respectively 600 and 60 tonnes as shown below. The equilibrium price and quantity combinations are also highlighted in yellow in the table.

The equilibrium can also be solved algebraically as follows. First we need to derive the equations for inverse demand and inverse supply curves as follows:

Inverse demand: Let the equation be P = a + b Q, where a = intercept and b = slope.

At price 100, quantity demanded is 160 and at price 200, quantity demanded is 140. Hence, the slope (=b), which measures the ratio of change in price to change in quantity = (100-200) / (160-140) = - 5.

Using b = -5 with P = 100 and Q = 160, we get, 100 = a - 5 (160) => 100 = a - 800 => a = 900

Therefore, the equation for the inverse demand curve is P = 900 - 5 Q

Inverse supply: Let the equation be P = c + d Q, where c = intercept and d = slope.

At price 100, quantity supplied is 10 and at price 200, quantity supplied is 20. Hence, the slope (=c), which measures the ratio of change in price to change in quantity = (100-200) / (10-20) = 10.

Using c = 10 with P = 100 and Q = 10, we get, 100 = c + 10 (10) => 100 = c + 100 => c = 0

Therefore, the equation for the inverse supply curve is P = 10 Q

Now at equilibrium, supply = demand => 10 Q = 900 - 5Q => 15 Q = 900 => Q = 900/15 => Q = 60

At Q=60, P = 10Q = 10(60) => P = 600

Hence, the equilibrium quantity and price are respectively 60 tonnes and 600 as shown in the diagram and table above.