Question

Please utilize well-executed, clearly constructed one graph for showing responses to all questions. You do not have to reproduce the graph for each question. Please remember to: · Label all axes (P, Q) · Label all lines/curves (Demand, Supply) · Label all relevant equilibrium points · Label intercepts for your linear demand and supply. (Intercepts are the points where the lines intersect the axes. For example, if a demand curve intersects the price axis at P=100, indicating that at P=100, 0 units are purchased, you should label that point on the axis with the price of 100).

Question 1 Suppose you have been hired by a research firm trying to understand the market for Widgets (a hypothetical product). Your analysis of the data indicates that the Demand curve for Widgets is estimated to be linear and given by equation Qd = 100 - 2P and the Supply curve for Widgets appears to be linear as well and is estimated as Qs = 2P - 20. Graphically draw these two curves, labeling all relevant points (such as intercepts for each line) on the horizontal and vertical axes.

Question 2 Given that Demand is Qd = 100 - 2P and Supply is Qs = 2P - 20, your next assignment is to compute the equilibrium Price and Quantity in the market for Widgets. Indicate these values on the graph.

Question 3 The firm that hired you has estimated that improvements in Widget quality tastes will cause the Demand curve to change to Qd = 140 - 2P. If the Supply curve remains the same (Qs = 2P - 20), graphically draw these two curves, labeling all relevant points on the horizontal and vertical axes.

Question 4 Given that New Demand is Qd = 140 - 2P and Supply is Qs = 2P - 20, your next assignment is to compute the new equilibrium Price and Quantity in the market for Widgets. Indicate these values on the graph.

Answer 1