View the step-by-step solution to:


1.     The following represents demand for widgets (a fictional product):

QD = 1058 - 250P -

0.0001M - 0.5PR

where P is the price of widgets, M is income, and PR is the price of a related (fictional) good, the wodget. Supply of widgets is determined by

QS = 2 + 250P

a.      Determine whether widgets are a normal or inferior good, and whether widgets and wodgets are substitutes or complements.

b.     Assume that M = $50,000 and PR = $2.00. Solve algebraically to determine the equilibrium price and quantity of widgets.

c.      Generate a supply/demand graph in Excel. Be sure that P is the vertical axis and Q the horizontal. Does the graphical equilibrium correspond to your algebraic equilibrium?

d.     Now assume two events occur: income rises to $60,000 and supply conditions change such that QS = 6 + 300P. Solve algebraically for the new equilibrium price and quantity of widgets after these two changes.

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes