# c2e - 2.e The Algebra of Supply Demand P S 15 3 D Q Using...

This preview shows pages 1–4. Sign up to view the full content.

2.e. The Algebra of Supply & Demand Using the equation for a straight line, y = mx + b, we can determine the equations for the supply and demand curve to be the following: Demand: P = 15 – Q Supply: P = 3 + Q To solve for the equilibrium price and equilibrium quantity, set the demand equation equal to the supply equation. 15 – Q = 3 + Q Q* = 6 Plug Q back into either the demand or supply equation to solve for P P* = 15 – 6 = 9 D S 15 3 P Q D S Q* P* 15 3

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
To calculate the amount of shortage resulting from a price ceiling at \$6, set the supply and demand curve both equal to \$6 Demand: 6 = 15 – Q Q = 9 Supply: 6 = 3 + Q Q = 3 THE AMOUNT OF SHORTAGE IS 9 – 3 = 6 UNITS To calculate the new equilibrium after imposing a \$5 tax, set the new demand curve equal to the supply curve. (Remember to solve for the equation of the new demand curve first.) Equation of new demand curve: P = 10 – Q 10 – Q = 3 + Q Q = 3.5 Plug Q into either the demand or supply curve equation to solve for Ps (price sellers will pay) P = 10 – 3.5 = 6.5

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern