What is the equilibrium price and equilibrium quantity? if, Ask an Expert

Management Studies

Answer all questions, a through f. On questions c, d, e and f show your math. If you do not show your math you do not receive points.\

Suppose that the demand and supply functions for good X are as follows:

QD = 75 + (.004)*M - 4*P
QS = -43 - (.4)*(PI) + 3*P

a. Is this good a normal good or an inferior good? How do we know?
b. Is the sign correct on the coefficient in front of PI? Explain why or why not?

Now...

Assume that M = 50,000 and PI = 80.

c. What is the equilibrium price and equilibrium quantity?

d. If a price of $40 occurs in the market, rather than the equilibrium price, would we have a surplus or a shortage? Of how many units?

e. If a price of $60 occurs in the market, rather than the equilibrium price, would we have a surplus or a shortage? Of how many units?

f. If the value of M increased from 50,000 to 60,000 and nothing else changed, would the equilibrium price increase or decrease? By how much? Would the equilibrium quantity increase or decrease? By how much?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M9351615

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