Question

A*. Demand and supply analysis (Math Approach) The following information reveals the market condition of SeaWorld, a theme park: Q° = 1000-P, where Q' is the quantity demanded and P is the ticket price of SeaWorld. Q = 100 + 2P, where QS is the quantity supplied. QP and Q are expressed in term of thousands of tickets. a) State the equilibrium condition. Calculate the equilibrium price and equilibrium quantity for the market of SeaWorld. Showing your workings. Suggested solution: Remark: Although mathematical approach is used for this demand and supply analysis, it is a must that students need to use appropriate economic concepts to support their work. Otherwise, it is an answer for a mathematic question and students use the wrong approach to answer an economic question. It is totally wrong that if no economic concept is applied and used in any economic question. In this question, the economic concept of 'equilibrium' must be provided as the base of student's explanation. Your explanation should be written in complete sentences and short paragraphs. Abbreviation is only accepted in workings or labels on any graph. Mark will be deducted if: The equilibrium condition is not written in complete sentence. The units of measurement such "$", "thousands tickets" are missing The conclusion statement is missing.

Answer 1

solution:-

a..... Equilibrium price and equilibrium quantity are determined by the forces of demand and supply. Market equilibrium (SeaWorld) will be determined where quantity demanded is equal to quantity supplied. If at a price quantity demand is not equal to quantity supply there will be either excess demand or excess supply and the price will change until equilibrium is restored.

At market equilibrium, quantity demanded = quantity supplied Q^d=Q^s

^{1000-P =100+2P or, 3P=900 or P=$300}

^{Now put the equilibrium price in any either of equation}

^{Q=1000-P or Q =1000—300 or Q= 700 thousand tickets}

^{Thus equilibrium price =$300 and equilibrium quantity =700 thousand tickets}

^{b.........when the manager set a price P=400, which is higher than the equilibrium price, there will be excess supply}

^{demand at price P=$400 , Q = 1000 —400 , or Q=600 thousand tickets}

^{Supply at price P=$400 Q=100 +2×400 or Q=900 thousand tickets}

^{Thus, this is a case of excess supply so the price will have tendency to decrease until P =$300 (equilibrium) is restored.}

^{Conclusion:- The market has a tendency to be in equilibrium, if price is higher than the market price,there will be excess supply and if the price is below the equilibrium price, there will be excess demand, the price will have tendency to change until equilibrium is restored.}