Answer the following questions on a separate piece of paper. STAPLE this sheet t

Question

Answer the following questions on a separate piece of paper. STAPLE this sheet to the front of your submission. One point will be deducted for unstapled work. 1. Assume that a competitive market is currently represented by the following supply and demand equations: Qs=P-20-5P Qd = 315-05P+W Where P is the price of the good, Po is the price of a related product, and W represents the consumers' income in terms of the hourly wage. A. If Po-$10 and W= $5, what are the equilibrium price and equilibrium quantity values? B. Derive expressions for the equilibrium price and equilibrium quantity that are functions f the hourly wage (W) and the price of the related product (Po). C. State the change in the price of the related product (APo) that is required to increase the supply of the product by 10 units at every possible price. Make sure your answer has the appropriate sign

Explanation / Answer

Qs = P - 70 at P0 equal to 10

Qd = 320 - 0.5P at W equal to 5

Equating both quantity supplied and quantity demanded at equilibrium

1.5P = 390

P = 260

Thus, Qs = 260 - 70 = 190

Qd = 320 - 130 = 190

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