Suppose the demand curve for a product is given by Q = 300 – 2P + 4I, where I is average income measured in thousands of dollars. The supply curve is Q = 3P – 50.
a. If I = 30, find the market clearing price and quantity for the product.
b. If I = 60, find the market clearing price and quantity for the product.
c. Draw a graph to illustrate your answers.
a. Given that "I=30"
Then the demand curve "Q = 300 \u2013 2P + 4(30)"
or "Q = 420-2P"
To find marketing clearing price, demand should be equal to supply
"Q_d =Q_s"
"420\u22122P = 3P \u2013 50"
"5P = 470"
"P = 94"
Therefore
"Q=420\u22122(94)"
"Q=420- 188"
"Q =232"
b. Given that "I=60"
Then the demand curve "Q = 300 \u2013 2P + 4(60)"
or "Q = 540-2P"
To find marketing clearing price, demand should be equal to supply
"Q_d =Q_s"
"540\u22122P = 3P \u2013 50"
"5P = 590"
"P = 118"
Therefore
"Q=590\u22122(118)"
"Q=590- 236"
"Q =354"
c.
Comments
Leave a comment