Answer to Question #274592 in Microeconomics for Desale

Question

Suppose the demand function that firm faces shifted from Qd=100-2p to Qd=80-3p and the supply function has shifted fromQs=50+4p to Qs=80+5pso that find the effect of this change on priceand quantity? and Which of the changes in demand and supply is higher?

Answer 1

At equilibrium; $Q_{d}=Q_{s}$

$100-2p=50+4p$

$50=6p$

$p=8.33$

Change in quantity demanded;

$=(80-3p)-(100-2p)$

$=(80-3(8.33))-(100-2(8.33))=-28.33$

Change in quantity supplied;

$=(80+5p)-(50+4p)$

$=(80+5(8.33))-(50+4(8.33))=104.97$

The change in supply is higher