Question

The demand for product X depends on the price of product X as well as the average household income (Y) according to the following relationship

Qdx = 750 - 25 P + 0.001Y

The supply of product X is positively related to own price of product X and negatively dependent upon W, the price of some input. This relationship is expressed as:

Qsx = 60 + 15 P - 2 W
Given that Y = 40,000 and W = 6, what is the:
1. Equilibrium price? ____________
2. Equilibrium quantity? ____________
Suppose that income increases to 50,000 and W remains constant. What is the new:
3. Equilibrium price? ____________
4. Equilibrium quantity? ____________
Assuming that income remains constant at 50,000 and W increases to 11, what is the new:

5: Equilibrium price? ____________
6. Equilibrium quantity? ____________

Answer 1

1. $Y=40000; W=6$ $750-25P+0.001×40000=60+15P-2×6;$

$750-25P+40=60+15P-12;$

$P=18.55;$

2. $Qd=750-25×18.55+0.001×40000; Qd=750-463.75+40;$

$Qd=326.25;$

$Qs=60+15×18.55-2×6; Qs=60+278.25-12;$

$Qs=326.25$

3.

$Y=50000; W=6;$

$750-25P+0.001×50000=60+15P-2×6;$

$750-25P+50=60+15P-12; 800-48=25P+15P;$

$40P=752; P=18.8;$

4. $Qd=750-25×18.8+0.001×50000;$

$Qd=750-470+50; Qd=330;$

$Qs=60+15×18.8-2×6; Qs=60+282-12;$

$Qs=330;$

5.

$Y=50000; W=11;$

$750-25P+0.001×50000=60+15P-2×11;$

$750+50-60+22=25P+15P;$

$40P=762; P=19.05$;

6. $Qd=750-25×19.05+50; Qd=750-476.25+50;$

$Qd=323.75;$

$Qs=60+15×19.05-2×11;$

$Qs=60+285.75-22; Qs=323.75;$