answer

watching

views

17 Jul 2019

Question 2

The question below is about market equilibrium and how to compute equilibrium values. Suppose demand and supply are given by Qd = 92-2P and Qs = -16+P.

What are the equilibrium quantity and price in this market? Show your work?

Hint:

Draw the demand and supply graph and label all initial points ( D⁰, S⁰, P⁰, E⁰), following the use of comparative statics given your text on pages 62-65)

Set demand equal to Supply and solve the values. See page 62 for a practice problem

answer

watching

134

views

For unlimited access to Homework Help, a Homework+ subscription is required.

You have 0 free answers left.
Get unlimited access to 3.8 million step-by-step answers.

Get unlimited access

Already have an account? Log in

Irving HeathcoteLv2

20 Jul 2019

Unlock all answers

Get 1 free homework help answer.

Already have an account? Log in

Related questions

Comparative Advantage
Suppose Steve can specialize and produce either 1600 rugs and 0 paintings, or 0 rugs and 800 paintings; and Cindy can produce 250 rugs and 0 paintings, or 0 rugs and 1000 paintings, and assuming constant opportunity costs:

State which person has a comparative advantage in rugs. Explain why.

Using your answer in part a, if the terms of trade are 3 rugs = 2 paintings, and Steve

initially produces 900 rugs and 350 paintings, and Cindy initially produces 175 rugs and 300 paintings, what are the gains from specialization and trade to each person if Steve trades 600 units of the good he has a comparative advantage in?

Supply and Demand

Given QD = 800 â 2P and QS = 2P + 100, what is the market equilibrium price (P*) and

quantity (Q*)?

Suppose a change occurs in the market such that QDâ = 660 â 2P and QSâ= 2P + 100.

Calculate the new market equilibrium price (P**) and quantity (Q**).

Elasticity

From your answers in the supply and demand question above, use the mid-point

formula to calculate the price elasticity of supply (to two decimal places).

Using your answer in part a, is the price elasticity of supply elastic, inelastic or unit

elastic?

State how you were able to determine if the price elasticity of supply is elastic, inelastic

or unit elastic.

salmonwombat608

You are a very powerful lobbyist and have convinced your client that you can make them the only legal extractor of coal in the United States and simultaneously make coal imports illegal. In essence, your client can become the coal monopoly. Currently, before the policy change, the supply and demand curves for coal are as follows:

Demand Curve: Qd = 70 â 1/2P

Supply Curve: Qs = 3/4P

Where Q is in tens of thousands of short tons and P is in dollars. Show all steps used to obtain answers.

Q1: What is the equilibrium price and quantity in a free market?

Q2: Present the supply and demand curves in the form P = f(Q) instead of the form provided Q = f(P).

Q3: Solve for the monopolyâs marginal revenue curve.

Q4: Once the coal monopoly has been implemented, what is the new equilibrium price and quantity?

(Hint, set marginal revenue curve equal to the marginal cost curve (i.e. supply curve) and solve.)

Q5: Using the âP, Qâ graph show the supply curve, demand curve, monopolistâs marginal revenue, and P and Q observed in the market for both a free market and monopoly

crimsonsnail59

The general supply function for new housing in New Orleans is estimated to be

Qs = 96 + 2P - 10PL + 4PK

where P is the price per square foot of new housing in New Orleans, PL is the average hourly wage rate for construction workers, and PK is the price of capital (as measured by the average rate of interest paid on loans to home builders). Qs is measured in units of 1,000 square feet per month.

5. Does it make sense for PL and PK to have negative coefficients in the general supply function? Explain why or why not.

6. If the average hourly wage rate for construction workers is $10 per hour and the average rate of interest on loans to builders is 9 percent (i.e., PK = 9), then the supply function for new housing is

Qs = ______________________.

7. Graph the supply curve for new housing in the graph below. Label supply S0.

8. Solve mathematically for equilibrium price and quantity. Show your work:

PE = $__________ per square foot.

QE = __________ square feet per month (in 1,000s).

9. Do your supply and demand curves intersect at PE and QE found in question 8 above? Should they?

10. At the equilibrium point in question 8, compute consumer, producer, and social surpluses:

CS = $____________

PS = $____________

SS = $____________

11. Suppose New Orleans suffers a serious recession that causes average monthly income to fall from $1,500 to $1,100 per month. If other things remain the same, the demand for new housing in New Orleans is now:

Qd = _______________________.

Plot this new demand curve in the figure below. Label it D'.

12. Suppose that because of the recession in New Orleans, the wage rate for construction workers falls to $8 per hour. If other things remain the same, the supply of new housing in New Orleans is now:

Qs = _______________________.

Plot this new supply curve in the figure. Label the new supply curve S'.

13. After income falls to $1,100 and wages fall to $8, new equilibrium price and quantity are

PE = $__________ per square foot QE = __________ square feet per month (in 1,000s)

Housing Market in New Orleans

90
80
70
60
50
40
30
20
10
	10	20	30	40	50	60	70	80	90	100	110	120	130	140	150

blackreindeer838

Weekly leaderboard

Home

Homework Help 3,900,000

Economics 400,000

Unlock all answers

Related textbook solutions

Principles of Economics

Principles of Macroeconomics

Principles of Microeconomics

Related questions

Related Documents

ECON 212 Quiz: ECON 212quizQuiz1A

ECO100Y5 Study Guide - Final Guide: Marginal Utility, Demand Curve, Horse Length

ECO 1104 Lecture Notes - Lecture 2: Demand Curve, Negative Number, Economic Equilibrium

Weekly leaderboard