Question

B. The following relations describe denand and supply conditions in the lumber forest products industry O is quantity of lumber, measured in thousands of board feet (one square foot of lumber, one inch thick P is price in dollars Demand QD 75,000-10,000P Supply -15,000+50,000 6 Find the quantity supplied and quantity demanded at the price of $4.00. Will there be shortage supply? How much will be the shortage or surplus? 12. Find the quantity supplied and quantity demanded at the price of $3.00. Will hlere be shortago supply? How much will be the shortage or surplus? 8 Find the quantity supplied and quantity demanded at the price of $2.50. Will there be shortage of supply? How much will be the shortage or surplus? 9. uantity supplied and quantity denunded at the price of $1.00, Will there be shortage of and y sipply?How much will be the shorage or surplus? lied and quantity densnded at the price of $0 S0. will there be shortage of 10 Fod the quantity suppl opply? How mach wil be the stortuge on surplus?

Answer 1

Answer

The quantity demand and quantity supply equations are as follows:

Q^D = 75,000 - 10,000 P

Q^S = - 15,000 + 50,000 P

6. When price is $4.00 ,

Putting the value of 'P' in the quantity demand  equation, we get,

Q^D = 75,000 - 10,000 * ( 4.00 )

Or, Q^D = 75,000 - 40,000

Or, Q^D = 35000

Now, putting the value of 'P' in quantity supply equation, we get,

Q^S = - 15,000 + 50,000 * ( 4.00 )

Or, Q^S = - 15,000 + 200,000

Or,  Q^S = 185,000

No, there is no shortage of supply. Here, we see , that when price is $4.00 , quantity supply is greater than the quantity demand in the market. So there is surplus in the market.

The surplus = Q^S - Q^D = 185,000 - 35,000 = 150,000 units.

So the surplus amount is 150,000 units.

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7. When price is $3.00 ,

Q^D = 75,000 - 10,000 * ( 3.00 )

Or, Q^D = 75,000 - 30,000

Or, Q^D = 45000

When price is $4.00,

Q^S = - 15,000 + 50,000 * ( 3.00 )

Or, Q^S = - 15,000 + 150,000

Or, Q^S = 135,000

There is no shortage of supply. Instead of shortage, there is surplus in the market , because at price, $3.00 , quantity supply is greater than the quantity demanded.

The surplus = Q^S - Q^D = 135,000 - 45,000 = 90,000 units.

So the surplus amount is 90,000 units.

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8. When price = $2.50,

Q^D = 75,000 - 10,000 * ( 2.50 )

Or, Q^D = 75,000 - 25,000

Or, Q^D = 50,000

When price is $2.50,

Q^S = - 15,000 + 50,000 * ( 2.50 )

Or, Q^S = - 15,000 + 125,000

Or,  Q^S = 110,000

At price, $2.50 also, there is no shortage of supply. At this price , quantity supply is greater than the quantity demanded in the market. So there is surplus in the market.

The surplus = Q^S - Q^D = 110,000 - 50,000 = 60,000 units.

So the surplus amount is 60,000 units.

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9. When price is $1.00,

Q^D = 75,000 - 10,000 * ( 1.00 )

Or, Q^D = 75,000 - 10,000

Or, Q^D = 65000

When price is $1.00,

Q^S = - 15,000 + 50,000 * ( 1.00 )

Or, Q^S = - 15,000 + 50,000

Or, Q^S = 35,000

At price $1.00, there is shortage of supply in the market. Here, we see , that when price is $1.00 , quantity supply is less than the quantity demanded. So there is shortage of supply in the market.

The shortage = Q^D - Q^S  = 65,000 - 35,000 = 30,000 units.

So the shortage of supply is 30,000 units.

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10. When price is $0.50,

Q^D = 75,000 - 10,000 * ( 0.50)

Or, Q^D = 75,000 - 5,000

Or, Q^D = 70,000

When price is $0.50,

Q^S = - 15,000 + 50,000 * ( 0.50)

Or, Q^S = - 15,000 + 25,000

Or, Q^S = 10,000

At price, $0.50,there is  shortage of supply in the market, because at this price, quantity supply is less than the quantity demanded in the market.

The shortage = Q^D - Q^S = 70,000 - 10,000 = 60,000 units.

So the shortage amount is 60,000 units.

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