Answer to Question #96831 in Macroeconomics for Jason Evanchuk

Question

Ad Venture is a company that produces advertising video clips. Their supply curve is Qs=-2W+6P, where
W (in 10s) is the hourly wage that the company pays their workers and P (in 1000s) is the ongoing market
price for a 1-minute commercial.
a) If the wage is $35, how much should the market price be so that Ad Venture produces 8 videos?
b) At the price you have determined at point a., how does the number of videos supplied change if the
wage decreases to $30? Show this situation in your graph.

Answer 1

a) Market price for 8 videos= $2500

explanation

$Qs=-2w+6p$

$w=35/10=3.5$

hence

$Qs=-2(3.5)+6p =-7+6p$

$p=2.5$

price=$2.5*1000$ $=2500$

b) 9 videos

explanation

wages $30

$$Qs=-2(3)+6(2.5)=9$$