Answered: An economist has estimated that the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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An economist has estimated that the demand function for cars is approximately D = −400P + 4I where I is the mean household income. The Supply of cars is estimated to be S = 2p

(a) What is the equilibrium price of cars (it will be a function of I)?
(b) How does the equilibrium price of cars change when I changes?

Expert Solution

Step 1: State the information given

The demand function for the cars are given as

D = -400P + 4I

I is the investment.

The supply function of the cars are given as

S = 2P

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The demand function has a captial P and the supply has a lowercase. Would these variables change the answers?

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