HW 1
Abigail Palmer
902048862
1. Suppose the demand curve for a product is given by Q=3002p+4Y, where Y is
average income measured in thousands of dollars. The supply curve is Q=3p50.
a. If Y=25, find the market clearing price and quantity for the product.
Qd=4002p
Qs=3p50
The market clearing price can be found by setting the supply curve and the
demand curve equal to one another.
4002p=Qd=Qs=3p50
450=5p
p=90
Therefore, the market clearing price is
90.
To find the quantity supplied and demanded at this price, we substitute 90
for p in one of the equations.
Qs=3*9050=18050=130
Therefore, the quantity for the product is
130.
b. If Y=50, find the market clearing price and quantity for the product.
Qd=5002p
Qs=3p50
5002p=Qd=Qs=3p50
550=5p
p=110
Therefore, the market clearing price is
110.
Qs=3*11050=33050=280
Therefore, the quantity for the product is
280.
c. Draw a graph to illustrate your answers.
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HW 1
Abigail Palmer
902048862
2. The supply of wheat in the US in 1998 is given by Q = 1944 + 207P and the
demand by Q = 3244 – 283P. At the end of 1998, both Brazil and Indonesia opened
their wheat markets to U.S. farmers. Suppose that these new markets add 200
million bushels to U.S. wheat demand. What will be the free market price of wheat
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 Fall '07
 Besedes
 Microeconomics, Free Market, Supply And Demand, market clearing price, free market price

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