FINDING THE EQUILIBRIUM POINT
At the beginning of 2005, Toyota sold 175,000 vehicles. Based on the company's analysis of the small car market, the company believed that $16,000 was the equilibrium price based on the following supply and schedules.
Price Amount Supplied Amount Demanded
$12,000 145,000 215,000
$14,000 160,000 195,000
$16,000 175,000 175,000
$18,000 190,000 160,000
$20,000 205,000 150,000
$22,000 220,000 135,000
As the price of gasoline rose through the summer and fall of 2005, Toyota revised its estimate of the amount of product demanded. At each of the above price points, they estimate that consumers will purchase 30,000 more autos. For instance, at $16,000, now 205,000 cars will be sold. The price/amount supplied relationship remains the same.
1. Describe what has happened to the supply and demand curves for Toyota automobiles.
2. What is the new equilibrium price?
3. How many cars will be produced at the new equilibrium price?