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ps4 - UNIVERSITY OF WISCONSIN Economics 101 Fall 2005 Wei...

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UNIVERSITY OF WISCONSIN Economics 101 – Fall 2005 Wei Zhang NOT TO BE TURNED IN Problem Set 4 Finish before the October 3rd Midterm. This problem set has been provided to help you prepare for Midterm 1. Answers are already posted. This problem set will be neither collected nor graded. Please direct questions to your TA. Supply and Demand and Market Equilibrium 1. Finding Market Equilibrium. Suppose that annual demand for widgets is given by the equation Q D =40-4P while the supply curve is given by Q S =2P-2. a) At what price would the quantity demand be 0? At what price would the quantity supplied be 0? b) Draw the supply and demand curves and label the equilibrium price and quantity. c) Calculate the equilibrium price and quantity algebraically. 2. Changes in Equilibrium due to Shifts in Supply and Demand. To examine the market for Pentium IV computers, draw a downward sloping demand curve and an upward sloping supply curve. Show the equilibrium price and quantity in a clearly labeled diagram.
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