ps4an - UNIVERSITY OF WISCONSIN Economics 101 Fall 2005 Wei...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
UNIVERSITY OF WISCONSIN Economics 101 – Fall 2005 Wei Zhang Problem Set 4 – Answer Key 1. Recall 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) Quantity demanded will be 0 when Price = $10. To show this, substitute 0 for Q D in the demand equation and solve for P: 0 = 40 – 4P 4P = 40 …… P=$10. Using the same technique, we find that quantity supplied will be 0 when Price = $1. b) c) To find equilibrium price and quantity, we must find a P * and Q * that satisfy both the demand and
Background image of page 1

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

View Full DocumentRight Arrow Icon
supply equations simultaneously. Computationally, this means we need to solve the system of 2 simultaneous equations. We know in equilibrium that Q S = Q D . Thus, 40 – 4P = 2P – 2 42 = 6P P * = $7. Then substitute P = 7 into either the supply or demand equation to find that: Q * = 2(7) – 4 = 12 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
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 5

ps4an - UNIVERSITY OF WISCONSIN Economics 101 Fall 2005 Wei...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online