Demand supply numerical 1_Fall 2010

Demand supply numerical 1_Fall 2010 - Economics 2100. Fall...

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1 Economics 2100. Fall 2010. Vivek Ghosal 1. Demand-Supply Numerical #1 We will do examples of working with linear demand and supply functions and discuss issues related to what would happen if: (a) the demand increased or decreased – shift of the demand function which could arise due to changes in consumer tastes, etc; and (b) if supply increased or decreased – shift of the supply function which could arise due to changes in the production costs or technology. Make sure you are familiar with computing the equilibrium and other details. Below is an example that takes you through the steps. The answers are on the next page. You should work out the numerical yourself before seeing the answers. Be sure to draw all the diagrams to better visualize the changes and the equilibrium. A. Consider a (hypothetical) market for low-end laptop computers. Let the initial market equilibrium be determined by the following functions. Demand: P = 1000 – 0.5Q D Supply: P = 100 + Q S What are the equilibrium quantity transacted and the market price?
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Demand supply numerical 1_Fall 2010 - Economics 2100. Fall...

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