Aggregate Supply Curve ( AS ): It shows how price and the quantity supplied are related to each other. The curve is positively slopped which means that when prices rise, the quantity supplied also rises. The curve depends on the duration of time. Short Run Aggregate Supply ( SRAS ): It is a positively slopped curve in which supply increases when price rises. The reason for upward slopping is that the wages are sticky in short run due to formal or informal contracts. At higher aggregate prices there is higher profit leading to high level of output. Long Run Aggregate Supply ( LRAS ): It is a vertical curve which means it is independent of price. When price increases there is no change in quantity supplied. In the long run nominal wages are not fixed rather it can be negotiated.

Question

Exercise 5Consider the demand and supply functions for the notebooks market.QD=10,000−100pQS=900pa. Make a table with the corresponding supply and demand schedule.b. Draw the corresponding graph.c. Is it possible to find the price and quantity of equilibrium with the graph method? d. Find the price and quantity of equilibrium by solving the system of equations.

Answer 1

Question

Chapter 12, Problem 4P

To determine

Concept Introduction:

Aggregate Supply Curve ( AS ): It shows how price and the quantity supplied are related to each other. The curve is positively slopped which means that when prices rise, the quantity supplied also rises. The curve depends on the duration of time.

Short Run Aggregate Supply ( SRAS ): It is a positively slopped curve in which supply increases when price rises. The reason for upward slopping is that the wages are sticky in short run due to formal or informal contracts. At higher aggregate prices there is higher profit leading to high level of output.

Long Run Aggregate Supply ( LRAS ): It is a vertical curve which means it is independent of price. When price increases there is no change in quantity supplied. In the long run nominal wages are not fixed rather it can be negotiated.

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Exercise 5Consider the demand and supply functions for the notebooks market.QD=10,000−100pQS=900pa. Make a table with the corresponding supply and demand schedule.b. Draw the corresponding graph.c. Is it possible to find the price and quantity of equilibrium with the graph method? d. Find the price and quantity of equilibrium by solving the system of equations.

1. Consider the market supply curve which passes through the intercept and from which the marketequilibrium data is known, this is, the price and quantity of equilibrium PE=50 and QE=2000.a. Considering those two points, find the equation of the supply. b. Draw a graph for this equation. 2. Considering the previous supply line, determine if the following demand function corresponds to themarket demand equilibrium stated above. QD=.3000-2p.

Supply and demand functions show different relationship between the price and quantities suppliedand demanded. Explain the reason for that relation and provide one reference with your answer.