Question

The demand function for rose is 𝑄 = a-5p, and the supply function is 𝑄 = e + 2p + 0.1t, where a and e are positive constants and t is the average temperature in a month. show how the equilibrium quantity and price vary with temperature.

Answer 1

p*= 1/7(a - e- 0.1t)

p₁ = a/7-e/7 -0.014t

So, equilibrium price increases, when the temperature falls and equilibrium quantity falls too.