Answer to Question #251453 in Microeconomics for David

Question

1) Suppose the demand for ice cream is given by Qd = 15–p, and the supply is described by Qs = –15 + p where,p is price of ice cream in US dollars per gallon ;Qd is the quantity of ice cream demanded in gallons .Qs is the quantity of ice cream supplied in gallons.

a) What is the equilibrium price of ice cream? What is the equilibrium quantity of ice cream? Draw the supply and demand curves on one single diagram. b) Suppose that due to the changes in number of buyers and ice cream sellers the ice cream demand and supply functions have changed over time. Suppose that they are described by the following demand and supply equations :Qd = 60 - 5p Qs = -20 + 3p

Answer 1

(a)

$Q_d=15-P$

$Q_s=-15+P$

At equilibrium, $Q_d=Q_s$

$15-P=-15+P$

$P=15$

Equilibrium quantity:

$Q_e=15-P$

$=15-15=0$

(b)

$Q_d=60-5P$

$Q_s=-20+3P$

At equilibrium, $Q_d=Q_s$

$60-5P=-20+3P$

$80=8P$

$P=10$

Equilibrium quantity:

$Q_e=60-5P$

$=60-5(10)$

$=10$