Suppose IronTown demand and supply curves for oil is given by ? = 500−4? ? = −100+6? Determine which one is the supply curve and which one is the demand curve and why? Calculate the equilibrium price and quantity. Suppose that IronTown demand changes to ? = 600−4?. Find the new equilibrium price and quantity.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
100%

Suppose IronTown demand and supply curves for oil is given by

? = 500−4?

? = −100+6?

  1. Determine which one is the supply curve and which one is the demand curve and why?
  2. Calculate the equilibrium price and quantity.
  3. Suppose that IronTown demand changes to ? = 600−4?. Find the new equilibrium price and quantity.
  4. Compare what happens to equilibrium quantities and prices in questions (2) and (c)?
  5. From equation (1), if the current price is 110, describe what happens to quantities and prices of demand and supply in this market?
Expert Solution
Step 1:

Basics :-

  • Slope of demand curve is negative i.e.  Demand function is written as :-

                                  Q= a - (b*P)

where,   a = intercept,      b = slope of demand curve (negative),          P = Price,            Q = Quantity demanded

 

  • Slope of supply curve is positive i.e. Supply function is written as :-

                                  Qs  = a + (b*P)

where,   a = intercept,      b = slope of supply curve (positive),          P = Price,                Qs  = Quantity supplied

 

  • At equilibrium level, Demand function is equal to Supply function.

                                  Q= Qs

                        a - (b*P)  = a + (b*P) 

 

steps

Step by step

Solved in 5 steps

Blurred answer
Similar questions
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education