Homework Answers
At eqm,
Demand = supply
10 - q/10 =q/5 - 2
12 = q/10 + q/5
12 = .1q + .2q
12 = .3q
So q* = 12/.3= 40
Eqm price = 10-q*/10
= 10 - 4
P* = 6
part 2) price ceiling = 3
now at P = 3, Quantity Demanded = 70
as , 3 = 10 - .1q
Qd = 7/.1 = 70
Quantity supplied =
As, from supply curve
3 = q/5 - 2
Qs = 25
Thus as Q demanded > Q supplied
So market will exhibit a shortage of 70-25 = 45 units
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