Question

Suppose the demand for towels is given by Q^D=100-5 P, and the supply of towels is given by Q^s=10 P

a. Derive and graph the inverse supply and inverse demand curves.

b. Solve for the equilibrium price and quantity.

c. Suppose that supply changes so that at each price, 20 fewer towels are offered for sale. Derive and graph the new inverse supply curve.

d. Solve for the new equilibrium price and quantity.

Answer 1

Q = lop =100-sp In Equilibrium Qd = RS 10o-SP = lop 100 slop tsp 100 = 15p P = 100 IS p = 6.67 ch Substituting pinto as equation Qs = 10 (6.67) = 66.67 units. Equilibrium rice = $6.67 quantity = 66.67 units. 2d=100-sp 100 10 Flop

leta L Price 1 c 10 20 30 40 so 6o 70 80 90 100 llo - Quantity gf at each price defewer towels are offered for sale. New supply equation Os = -20 top
c and d part

New Equilibrium New Qs = ad -20 top = 100 -SP loptsp =loot2o isp = 120 P = 120 New equilibrium P = 8 Substituting p into Qd equation od -100-sp =100-S (8) -oo- no Equilibrium a=60 units, I New

Answer 2

Qd = 1000 – 5p Qs = -400 + 15p, where P = Price per unit (R) (i) Draw the demand and supply curves on a graph and find the equilibrium price and quantity

Answer 3

Suppose that the inverse demand curve for a dinner-for-two special at a small local restaurant can be expressed as �=4,900−3�2