ECON 1050 Lecture Notes - Economic Equilibrium, Price Floor, Ceteris Paribus

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blushmosquito8

1 Aug 2012

School

University of Guelph

Department

Economics

Course

ECON 1050

Professor

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Document Summary

We can analyze demand and supply and market equilibrium with linear equations. These are equations of the form y = a + bx where a is the y-intercept, i. e. , the value of y when x is zero, and b is the slope (rise/run = d y/d x) of the function. We know that the function is linear, i. e. , a line, because the slope is constant. The slope is negative the y falls with an increase in x and is positive if y increases with an increase in x. Example: suppose that the following equations describe the market demand for and supply of a. Supply: ps = 30 + 0. 1qs (p is in and q is in units) We don"t need to label these equations demand and supply since the negative slope of the first one and the positive slope of the second one tell us that they are demand and supply respectively.

Related Questions

Suppose that the equilibrium price of copper is 5 and the equilibrium quantity of copper is 20. At the market equilibrium, the price elasticity of demand for copper is -0.5, and the price elasticity of supply for copper is 1.0

a) Is the demand for copper elastic or inelastic at the market equilibrium? Explain briefly

b) Assume that the supply and demand curves are linear. Find the equations for supply and demand.

c) Suppose that the quantity of copper supplied at each price falls by 50%. What are the new equilibrium price and quantity?

d) What are the price elasticities of demand and supply at the new equilibrium?

jadejellyfish119

1) (5 points) The y-axis intercept of the supply curve is 80 and the slope is 8. The equation of the supply curve _ (in terms of P (price) and Qs (quantity supply)). The y-axis intercept of the demand curve is 280 and the slope is-2. The equation of the demand curve is (in terms of P (price) and Qo (quantity demand)). Given the demand and supply equations determine the Equilibrium quantity in the above market.

The table below shows the demand and supply schedules for rolls of film.

Price	Quantity demanded	Quantity supplied
($ per roll)	(rolls per week)	(rolls per week)
2.00	3,000	1,000
3.00	2,500	1,500
4.00	2,000	2,000
5.00	1,500	2,500
6.00	1,000	3,000

a. Explain the concepts of demand, supply, and market equilibrium. What is the market equilibrium price for rolls of film? What is the equilibrium quantity?

b. If the price of film is $3 a roll, describe the situation in the film market. Is there shortage or surplus at this price? Explain how market equilibrium is restored.

c. A rise in income increases the quantity demanded by 1,000 rolls a week at each price. Draw a new table to account for this change in demand.

What will be the new equilibrium price? Which quantity will be traded? Explain how the film market adjusts to its new equilibrium.

d. The number of film production lines increases, and at the same time, people switch to digital cameras. How do these events influence demand and supply? Do they create a shortage or a surplus at the equilibrium price in part a? Describe how the price and quantity change.

ECON 1050 Lecture Notes - Economic Equilibrium, Price Floor, Ceteris Paribus

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