The demand function for rose isa Q=a-bp and the supply function is Q=c+ep+ft, where a,b,c,e and for are positive constant and the is an average temperature in a month. Show how the equilibrium quantity and price vary with temperature?
If demand function for rose is Qd = ap-b and the supply function is Qs = c+ep+ft, then in equilibrium Qd = Qs, so: apb = c+ep+ft p*(e + b) = a - c - ft p = (a - c - ft)/(e + b) So, equilibrium price increases, when the temperature falls and equilibrium quantity falls too.
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