Question

The daily demand for hotel rooms on Manhattan Island in New York is given by the equation QD = 250,000 - 375P. The daily supply of hotel rooms on Manhattan Island is given by the equation QS = 15,000 + 212.5P (Use 100$ as the beginning and 600$ as the last price). a. Calculate and provide the demand and supply schedule. (15pts.) b. What is the equilibrium quantity and equilibrium price?

Answer 1

A) Demand schedule: Demand refers to the quantity of a commodity which a consumer is willing and able to buy at a given price during a given period of time. Demand schedule is a table showing different quantities of a commodity which is demanded at various level of price during a given period of time. Demand curve is the graphical representation of demand schedule and shows inverse relationship between price and quantity demanded. And on a graphical Chart where the Y-axis represents the price and X-axis represents the quantity.

Supply schedule: It is a schedule showing the quantity of a good or service that sellers will offer at various prices during a specific period of time.

B) Equilibrium quantity and Equilibrium price:

QD = Quantity Demanded , QS = Quantity Supplied

Here, QD = 2,50,000 - 375P

QS = 15,000 + 212.5P

Here we get QD = QS 2,50,000 - 375P = 15,000 + 212.5P

P = 400

Put P in both quantity functions, QD = 2,50,000 - 375P

   2,50,000 - 375(400)

   2,50,000 - 1,00,000 = 1,00,000

QS = 15000+ 212.5P 15,000 + 212.5(400) 15,000 + 85,000 1,00,000

So, we know that equilibrium price is 400 and equilibrium quantity is 1,00,000.