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In: Economics

Q1: A market is represented by Q = 300 – 3P and Q = 5P –...

Q1: A market is represented by Q = 300 – 3P and Q = 5P – 100 where Q is measured in units per year and P is measured in dollars per unit.

a) Which equation represents the demand in the market? Explain how you determined that this equation is demand.

b) Which equation represents the supply in the market? Explain how you determined that this equation is supply.

c) What is the equilibrium price (P*) and the equilibrium quantity (Q*) in the market? Show your calculations.

d) Suppose the current price in the market is $40/unit. Does a surplus or a shortage exist at this price AND what is its size?

e) Suppose the current price in the market is $60/unit. What will happen in this market in response to market forces?

Q2: A market is represented by Q = 200P – 800 and Q = 11800 – 150P where Q is measured in units per year and P is measured in dollars per unit.

a) Which equation represents the demand in the market? Explain how you determined that this equation is demand.

b) Which equation represents the supply in the market? Explain how you determined that this equation is supply.

c) What is the equilibrium price (P*) and the equilibrium quantity (Q*) in the market? Show your calculations.

d) Suppose the current price in the market is $42/unit. Does a surplus or a shortage exist at this price AND what is its size?

e) Suppose the current price in the market is $25/unit. What will happen in this market in response to market forces?

Q3: A market is represented by Q = 4P – 22 and Q = 80 – 2P where Q is measured in units per year and P is measured in dollars per unit.

a) Which equation represents the demand in the market? Explain how you determined that this equation is demand.

b) Which equation represents the supply in the market? Explain how you determined that this equation is supply.

c) What is the equilibrium price (P*) and the equilibrium quantity (Q*) in the market? Show your calculations.

d) Suppose the current price in the market is $15/unit. Does a surplus or a shortage exist at this price AND what is its size?

e) Suppose the current price in the market is $20/unit. What will happen in this market in response to market forces?

Solutions

Expert Solution

Rahul Sunny answered 2 years ago
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