Question

Assume that demand for a commodity is represented by the equation P = 20 – 0.6 Q d, and supply by the equation P = 10 + 0.2 Qs where Qd and Q s are quantity demanded and quantity supplied, respectively, and P is the Price. Use the equilibrium condition Qs = Qd

1: Solve the equations to determine equilibrium price.

2: Now determine equilibrium quantity.

3. Make a Table of points and then graph the following

4. Graph Demand curve with points showing.

5. Graph Supply Curve with points showing

6: Graph the two equations to substantiate your answers and label these two graphs as D1 and S1. with Equilibrium showing

7: Furthermore; using demand and supply show what happen to equilibrium price and quantity if eating this product causes cardiac problem.

Answer 1

We have the following information Demand equation: P 20 0.6Qd or Qd 33.33 - 1.67P Supply equation: P 100.20s or Qs505P For equilibrium we will equate demand and supply equation 20 0.6Q 10 0.2Q 10 0.8Q uilibrium quantity 12 Equilibrium price: P 20-0.6Q P-20- (0.6 x 12.5) Equilibrium price 12.5 Price Demand Supply 10.0 10.5 11.0 11.5 12.0 12.5 13.0 13.5 14.0 14.5 15.0 15.5 16.0 16.5 17.0 17.5 18.0 18.5 19.0 19.5 16.6 15.8 15.0 14.1 13.3 12.5 11.6 10.8 10.0 9.1 8.3 7.4 6.6 5.8 4.9 0.0 2.5 5.0 7.5 10.0 12.5 15.0 17.5 20.0 22.5 25.0 27.5 30.0 32.5 35.0 37.5 40.0 42.5 45.0 47.5 3.3 2.4 1.6 0.8

25.0 20.0 e 15.0 10.0 5.0 0.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 Quantity DemandSupply