1. For parts a, b and c refer to a good for which the supply and demand equations are given by: Qa = 250 - 15P Qs = 100 + 10P where Qd, Qs and P represent, respectively, the quantity demanded, the quantity supplied in units per week, and the good's price in £. Which of the following statements are true, false or uncertain? Fully explain your reasons by drawing a relevant diagram for each part: a) when P = £10 there is an excess demand of 100 units; b) when Q = 160 units per week the market is in equilibrium; c) if the government imposed a fixed tax of £5 per unit produced, the equilibrium quantity will increase while the equilibrium price will fall.

1. For parts a, b and c refer to a good for which the supply and demand equations are given by: Qa = 250 - 15P Qs = 100 + 10P where Qd, Qs and P represent, respectively, the quantity demanded, the quantity supplied in units per week, and the good's price in £. Which of the following statements are true, false or uncertain? Fully explain your reasons by drawing a relevant diagram for each part: a) when P = £10 there is an excess demand of 100 units; b) when Q = 160 units per week the market is in equilibrium; c) if the government imposed a fixed tax of £5 per unit produced, the equilibrium quantity will increase while the equilibrium price will fall.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter5: Markets In Motion And Price Controls

Section: Chapter Questions

Problem 10P

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