Homework Answers
1.Answer:
A) equilibrium price at Dm: $20 thousand
Equilibrium quantity at Dm: 366 motorcycle
B) equilibrium price at Dl: $10 thousand
Equilibrium quantity at Dl: 366 motorcycle
C) equilibrium price at Dh: $30 thousand
Equilibrium quantity at Dh: 366 motorcycle
D) if this model is shocked by changes in demand the price will vary according to the demand but the supply is perfectly inelastic to the change in price, so the output or supply of the firm will not change.
Explaination:
The graph of demand and supply of motorcycle shown here, which indiacates the 3 demand curves is intersect to the supply curve at 3 different point , these points are shows the equilibrium price and equilibrium quantity at different demands. Supply is perfectly inelastic to the price.
So, when demands change the price accordingly changed but as the supply is inelastic, will not change the output of the firm.
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that 300 motorcycles is the optimal and most profitable level of
production for the firm. All dollars are in thousands.
(a) What are the equilibrium price and quantity at the
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(b) What will be the equilibrium price and quantity if
there is a demand shock that unexpectedly lowers demand
(DL)?
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