Question

Given the original demand and supply equations for period 1, Qd = 120 - 6P and Qs = 12 + 4P solve the following:

Problem 1: The new and original price equilibrium given that the new demand and supply equations are Qd = 130 - 6P and Qs = 20 + 4P

Problem 2: The new and original quantity equilibrium given that the new demand and supply equations are Qd = 130 - 6P and Qs = 20 + 4P

Problem 3: The change in price equilibrium given that the new demand and supply equations are Qd = 130 - 6P and Qs = 20 + 4P

Problem 4: The change in quantity equilibrium given that the new demand and supply equations are Qd = 130 - 6P and Qs = 20 + 4P

Answer 1

1.The original demand equation = $Q$_d $=120-6P$

The original supply equation =$Q$_s= $12+4P$

At equilibrium $Q$_d$=Q$_s

$120-6P=12+4P$

$120-12=4P+6P$

$=108=10P$

$=108/10=10P/10$

$=10.8=P$

$\therefore$ $P=10.8$

The original price is 10.8.

The new demand equation = $Q$_d $=130-6P$

The new supply equation =$Q$_s$=20+4P$

At equilibrium $Q$_d$=Q$_s

$130-6P=20+4P$

$=130-20=4P+6P$

$=110=10P$

$=110/10=10P/10$

$=11=P$

$\therefore$ $P=11$

The new price is 11.

2.The original quantity demanded=$Q$_d$=120-6P$

$=120-6*10.8$

$=55.2$

The original quantity supplied $=Q$_s$=12+4P$

$=$ $12+4*10.8$

$=$ $55.2$

The new quantity demanded= $Q$_d$=130-6P$

$=130-6*11$

$=64$

The new quantity supplied = 64

3.The change in price equilibrium = $New price -Original price$

$= 11-10.8$

$=0.2$

4.The change in quantity equilibrium $=New quantity - Original quantity$

$=64-55.2$

$=8.8$