1) Demand curve is given by Q=a-bP
Now, when Q=0, P=a/b and when P=0,Q=a. Thus, the demand curve has vertical and horizontal intercepts of a/b and a respectively. -b is the slope of the demand curve (negatively sloped). In the diagram below, we have shown the demand curve.
Again, Supply curve is given by Q=-c+dP
Now, when Q=0, P=c/d and when P=0,Q=-c. Thus, the supply curve has vertical and horizontal intercepts of c/d and -c respectively. d is the slope of the supply curve (positively sloped). In the diagram below, we have shown the supply curve.
2) For equilibrium,
demand = supply
or, a-bP=-c+dP
or, P(d+b)=a+c
or, P = (a+c)/(b+d) is the equilibrium price
and Q = a-bP = a-b{(a+c)/(b+d)} = (ab+ad-ab-bc)/(b+d) = (ad-bc)/(b+d) is the equilibrium quantity
3) When a increases, horizontal and vertical intercepts increases and demand curve shifts to the right. As a result, equilibrium price and quantity rises.
When b increases, vertical intercept falls. As a result, slope of the demand curve becomes flatter. This causes equilibrium price and quantity to fall.
With increase in c, supply curve shifts to the left. Both vertical and horizontal intercept rises. As a result, equilibrium quantity falls but equilibrium price rises.
Now with increase in d, slope of the supply curve becomes flatter (vertical intercept decreases). As a result, equilibrium price falls but equilibrium quantity rises.
4) a=10,b=2,c=5,d=3.
Equilibrium price P=(a+c)/(b+d) = (10+5)/(2+3) = 15/5 = $3
and equilibrium quantity Q = (ad-bc)/(b+d) = (30-10)/(2+3) = 20/5 =4 units
If a increases to 15, P=(a+c)/(b+d) = (15+5)/(2+3)=$4 and Q=(ad-bc)/(b+d) = (45-10)/(2+3)=7 units.
If b increases to 4, P= (a+c)/(b+d) = 15/7 = $2.14 and Q = (ad-bc)/(b+d) = (30-20)/(4+3) = 10/7 = 1.4 units.
If c increases to 8, P=(a+c)/(b+d)=18/5 = $3.6 and Q=(ad-bc)/(b+d) =(30-16)/(2+3)= 2.8 units
If d increases to 5, P=(a+c)/(b+d)= 15/7 = $2.14 and Q=(ad-bc)/(b+d) = (50-10)/(5+3)=40/8 = 5 units.
it is all one question, please answer them all! thank you! 2. Points = 26. Consider...
2. Points = 26. Consider Market Model: Demand: Supply: Q=a-bP Q=-c+dP (a, b>0) (c,d > 0) 1) Discuss in words the meaning of each equation in the model (3 points); 2) Find the equilibrium levels of P* and Q* (3 points); 3) Draw qualitative conclusions about changes in P* and Q* when each of the parameters change. (Qualitative conclusion shows the direction of change.) Explain economic meaning of these changes. (Total 6 points: 3 points for P*; 3 points for...
Consider Market Model: Demand: Supply: Q= a - bP Q=-c+dP (a, b > 0) (c, d > 0) * 1) Discuss in words the meaning of each equation in the model (3 points); 2) Find the equilibrium levels of P* and Q* (3 points); 3) Draw qualitative conclusions about changes in P* and Q* when each of the parameters change. (Qualitative conclusion shows the direction of change.) Explain economic meaning of these changes. (Total 6 points: 3 points for P*;...
2. Consider Market Model (а, b > 0) (c, d >0) Demand: Q%3Dа — БР Q%3D-с + dP Supply: 1) Discuss in words the meaning of each equation in the model 2) Find the equilibrium levels of P and Q* 3) Draw gualitative conclusions about changes in P* and Q' when each of the parameters change. (Qualitative conclusion shows the direction of change.) Explain economic meaning of these changes 4) If a 10, c 5, b = 2; d =...
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Consider National-Income Model: National Income: Consumption: Investment: Government Sector: Taxes: Y=C+I+G C = a + b (Y-T) I=k+rY G=GO T=f+jY <b<1 (<r<1 a>0 in mln dollars; k>O in mln dollars; Go >O in mln dollars fo in mln dollars; 0<j<1 1) Discuss in words the meaning of each of the equations in the model (3 points); 2) Find the equilibrium level of GDP (Y*) in reduced form (3 points); 3) If we know the parameters of the system, find the...