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.
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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
100%
Suppose IronTown
? = 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.
- Compare what happens to
equilibrium quantities and prices in questions (2) and (c)? - 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 :-
QD = a - (b*P)
where, a = intercept, b = slope of demand curve (negative), P = Price, QD = 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.
QD = Qs
a - (b*P) = a + (b*P)
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