Question 2. (10 points) Suppose the demand and supply curves for units of university credits are...

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Question 2. (10 points) Suppose the demand and supply curves for units of university credits are given by the following equat (b) (3 points) Suppose that the government wants to make education more accessible and therefore passes a regulation that say

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Answer 1

Answer #1

a. At free market equilibrium, Qd = Qs

5000 - P = 3P - 200

5000 + 200 = 3P + P

5200 = 4P

P = 5200/4 = $1300

Q = 5000 - 1300 = 3700 units.

b. With price charged $800,

Qd = 5000 - 800 = 4200 units would be demanded

Qs = 3 * 800 - 200 = 2200 units would be supplied.

Thus creating a shortage of 4200 - 2200 = 2000 units.

The equilibrium price would be $800 and the quantity would be 2200 units.

c.

Price 1300 800 - Qty 2200 3700 4200

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