ECO 550 - Question 1 - ;Qd=5005 a)($50...

Suppose the demand and supply curves for a product are given by
a) Graph the supply and demand curves in Excel (use the market
b) Find out (numerically) the market equilibrium price and quantity
d) Now the demand shifts in (decrease) by 20% due decrease in c
Qd = 500 - 5P Qs = 100 + 5P
(a) Demand Supply Mkt Price
300 300 40
250 350 50
175 425 65
50 550 90
-25 625 105
-100 700 120
c) If the current market price of the product is $50, what is the qua
1 2 3 4 5
-200
-100
0
100
200
300
400
500
600
700
800

(b)
Qd = 500 - 5P Qs = 100 + 5P
At Market Equilibrium, Qd = Qs
500 - 5P = 100 + 5P
10P = 400
P = 40
Quantity at this Price
Qd = 300
Qs = 300
(c) At market Price of 50, quanitity demanded is 250 and quantity supplied is 350. At this
by consumers. Thus, market will move towards equilibrium until both quantity supplied
(d)
Mkt Price Demand Supply
Decrease by 20% increase by 30 %
40 240 390 Qd = 80% (500 - 5P)
50 200 455 Qs = 130% ( 100 +5P)
65 140 552.5
90 40 715
105 -20 812.5
120 -80 910
1 2 3 4 5 6
-200
0
200
400
600
800
1000
Column B
Column C

(d) New Equilibrium Price will be as follows
Qd = 80% (500 - 5P)