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
Then the demand curve
or
To find marketing clearing price, demand should be equal to supply
Therefore
b. Given that
Then the demand curve
or
To find marketing clearing price, demand should be equal to supply
Therefore
c.
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