The bat man in toys store is supplied by the equation P=5Q.Market demand is given...

The bat man in toys store is supplied by the equation P=5Q. Market demand is given equation by P=16-3Q. What is the total revenue for the toys market? If the price of the bat man increase to 15 per one, how much surplus or shortage will exist? How much will the line shift in order to get equilibrium?

Expert Solution

The equilibrium is established at point E equilibrium price is 10 and quantity is 2 units.

Total revenue is P×Q = 10×2 = 20

There will be an excess supply of 2 units as price increased to 15 as supply and price has direct relationship. As price increases supply also increase. But due to this excess supply some suppliers will try to sell the goods at lower price because sale at lower price is better than non sale and others will join them . So there will be a rightward shift in the supply curve. Till the point where demand and supply intersects. Here that point is E' where price is 8 and quantity 2.5. But during this process demand will increase as price falls and supply will decrease untill the equilibrium point.

Rahul Sunny answered 2 years ago

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