Estimate the equilibrium price and quantity and describe the impact of change in price
In a mid-sized city in southern Ontario the demand for bus service is:
Q= 17280 -6480P where P is the price per trip and Q the number of riders.
The public transit supply curve is:
Q = 10800P
a) Illustrate what is the equilibrium price and quantity for bus service in this community?
b) If the demand for bus services increased by 10%. Illustrate what is the new equilibrium price and quantity?
c) If City Council would not let the price change to the new equilibrium price (i.e. the price was held at the pre increase in demand price, how large would the shortage be?
d) With holding the price at the lower level, how many riders would be using the service?