Answer to Question #54025 in Economics of Enterprise for Abdulaziz Mohammed

Question

Question 8
Suppose the demand curve for a good is given by the equation Q = 100 - P and the supply curve is given by the equation Q = 0.25P, where P represents the price of the good (measured in dollars per unit) and Q represents the quantity of the good (measured in units per week).

a. Find the equilibrium price and quantity for this market.

b. Suppose quantity demanded for the good rises by 10 units at every possible price while at the same time quantity supplied falls by 5 units at every possible price (with the exception that quantity supplied cannot drop below zero units at any price). Find the new equilibrium price and quantity in this market.

c. Given the change in demand, how large would the fall in supply need to be (given the same 10 unit rise in demand) in order for the price to decrease instead of increasing as in part (b)?