Question

Suppose that the market demand for aluminum in a given country is given by the equation Qd =600-50P WHERE P is the price of aluminum expressed in dollar per kilogram and want to adopt price

Answer 1

Solution

Given the following;

Q_d= 600 - 50P and Q_s = -400 + 50P

At equilibrium, Q_d = Q_s

600 - 50P = -400 + 50p

600 + 400 = 50P + 50P

1000 = 100P

$\frac{1000}{100} = P ​$

P = 10

Equlibrium price = $10

Equilibrium Quantinty = $600 - (50 \times10) or -400 + (50 \times 10)$

= 600 - 500 or - 400 + 500 = 100units

After 10% increase, New Price = $10 + (10 \times0.1)= 11$

Effects on Quantity Demanded and Quantity supplied:

Qd = 600 -$(50 \times 11)$ = 600 - 550 = 50units (decrease)

Qs = -400 + $(50 \times11)$ = -400 + 550 = 150units (increase)