Answer to Question #210940 in Microeconomics for lynn

Question

1)     Consider a demand curve of the form Q_d = 20-2p where Q_d is the quantity demanded of a good and p is the price of the good. Also consider a supply curve of the form Q_s = 2p-4 where Q_s is the quantity supplied. Graph these curves. At what values of P and Q do these curves intersect?

2)     Now suppose at each price individuals demand four more units of output, that is the demand curve shifts to Q_dd = 24-2p.  Graph this new curves. Graph this new curve on the diagram drawn in part 1)  At what values of P and Q does the new demand curve intersect the supply curve identified in part 1)

Answer 1

1.

From the above graph, the two curves intersect at a point (8,6);

At this point of intersection;

equilibrium quantity= 8

equilibrium price =6

1. When demand curve sifts to Qdd=24-2p, the new graph is as shown below

From the above graph, the two curves intersect at a point (10,7);

At this point of intersection;

equilibrium quantity= 10

equilibrium price =7