Answer to Question #274106 in Economics of Enterprise for Draxler

Question

Q=20 - I/2 P

•Where Q is the monthly quantity demanded of compact discs (CDs) in million and P is their price.

–Draw a demand curve given by this equation between CD prices of £1 and £20

–A new format results in a fall in demand of CDs of 5 million per month at any given price

–What is the new formula for quantity demanded of CDs? 

–Plot the new demand curve on your diagram.

Answer 1

Solution:

The demand curve is combined below:

 

 

The new formula for quantity demanded of CD’s:

Q = (20 – 0.5P) – 5

Q = 15 – 0.5P

 

The new demand curve is drawn on the previous demand curve: