The supply curve for rental cars in San Francisco is given by the equation Qs=100+8p. The...

The supply curve for rental cars in San Francisco is given by the equation Qs=100+8p. The demand curve for rental cars is given by the equation Qd=500-2P. P is the daily rental price, in dollars, and Q is the number of rentals per day.

a. Use algebra to determine the equilibrium price and quantity of rental cars in San Francisco. Show your work. Be sure to include the units of measurement in your answers.

b. Draw a graph of the market for rental cars. On your graph, clearly label the axes, the demand and supply curves, and the equilibrium price and quantity.

Solutions

Expert Solution

A) At equilibrium, Qd = Qs

That is, 500-2P = 100+8P

This gives, 400 = 10P

Or, P* = $40

Q* = 100+8(40) + 500-2(40) = 420 rentals per day

B) The required graph is below:

Rahul Sunny answered 2 years ago

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