Consider the following general linear demand and supply functions that represent a market: Qd = Z −GP (3) Qs = D + EP+ CS (4) where P is the price, S is a variable denoting the average amount of production shipping costs, and Qd and Qs are the quantity demanded and the quantity supplied. Assume D, E, G, and Z all have values greater than zero. What equation (in addition to equations 3 & 4) completes our mathematical model of market equilibrium? Identify the parameters, endogenous variables, and exogenous variables in the above system of Derive expressions for the equilibrium market price (P∗) and quantity (Q∗) and illustrate your answers with a graph. Be sure to specify the symbolic values of the demand and supply curves where they intersect with the P-axis and Q-axis in the positive Given your results from part (a), use calculus to determine the effect of a small increase in shipping on the equilibrium price (P*). What is the sign of the expression you find? Be sure to briefly describe the logic you use to determine whether C is positive or negative

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the following general linear demand and supply functions that represent a market:

Q_d = Z −GP (3)

Q_s = D + EP+ CS (4)

where P is the price, S is a variable denoting the average amount of production shipping costs, and Q_d and Q_s

are the quantity demanded and the quantity supplied. Assume D, E, G, and Z all have values greater than zero.

What equation (in addition to equations 3 & 4) completes our mathematical model of market equilibrium?
Identify the parameters, endogenous variables, and exogenous variables in the above system of
Derive expressions for the equilibrium market price (P^∗) and quantity (Q^∗) and illustrate your answers with a graph. Be sure to specify the symbolic values of the demand and supply curves where they intersect with the P-axis and Q-axis in the positive
Given your results from part (a), use calculus to determine the effect of a small increase in shipping on the equilibrium price (P*). What is the sign of the expression you find? Be sure to briefly describe the logic you use to determine whether C is positive or negative.

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