The market demand and supply functions of a good are given by: QD = 400 – 15P Qs =-50 + 10P where Qp, Qs and P denote quantity demanded, quantity supplied and price, respectively. (a) Work out the values of QD and Qs when P = 5, 10, 15, 20 and 25, and hence draw accurate graphs of the demand and supply curves on the same diagram with Q plotted on the horizontal axis and P plotted on the vertical axis. (b) Hence, or otherwise, find the equilibrium price and quantity. (c) For what values of P is there excess demand?

The market demand and supply functions of a good are given by: QD = 400 – 15P Qs =-50 + 10P where Qp, Qs and P denote quantity demanded, quantity supplied and price, respectively. (a) Work out the values of QD and Qs when P = 5, 10, 15, 20 and 25, and hence draw accurate graphs of the demand and supply curves on the same diagram with Q plotted on the horizontal axis and P plotted on the vertical axis. (b) Hence, or otherwise, find the equilibrium price and quantity. (c) For what values of P is there excess demand?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Q1
The market demand and supply functions of a good are given by:
QD
= 400 – 15P
Qs =-50 + 10P
where
QD, Qs and P denote quantity demanded, quantity supplied and price, respectively.
(a) Work out the values of QD and Qs when P = 5, 10, 15, 20 and 25, and hence draw accurate
graphs of the demand and supply curves on the same diagram with Q plotted on the horizontal
axis and P plotted on the vertical axis.
(b) Hence, or otherwise, find the equilibrium price and quantity.
(c) For what values of P is there excess demand?
(d) The government decides to impose a fixed tax of $5 on each good. Describe the effect, if any,
on the demand and supply curves on your diagram and calculate the new equilibrium price and
quantity.

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