.11 Sprint 7:50 AM 1 ) Suppose the demand curve for a product is given by Q = 30
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Question
.11 Sprint 7:50 AM 1 ) Suppose the demand curve for a product is given by Q = 300 -2P +4, where I is the average income measured in thousand of dollars. The supply curve is Q 3P- 50 a) IfI-25, find the equilibrium price and quantity. (2 points) b) If I-50, find the equilibrium price and quantity. (2 points) 2) Use supply and demand curves to illustrate the following on the market quantity and price of butter (8 points) a) an increase in the price of margarine b) an increase in the price of cream c) an increase in average income levels, d) an announcement of a major scientific study indicating that margarine is just as bad for your health as butter Note: you will need to draw two set of diagrams: before and after the changes and clearly label the price and quantity before and after the changes. 3) Assume that tea and lemons are complements and that coffee and tea are substitutes. a How, if at all, will the imposition of effective ceiling price on tea affect the price of lemons? Explain with the aid of a diagram (2 points). b. How, if at a wl the imposition of an effective ceiling price on tea affect the price of coffee? Explain with the aid of a diagram (2 points) 4. Use a labor market supply and demand model to answer the following questions. a) From an equilibrium position a minimum wage is set above the going wage. Sketch graph this possibility and show 1) the number of workers who would like to laid-off from their jobs (3 points) minimum wage law? (1 points). work at this higher wage, 2) the number of workers b) Is society better or worse off because of the newExplanation / Answer
(1)
Demand: Q = 300 - 2P + 4I
Supply: Q = 3P - 50
(a) When I = 25, Demand: Q = 300 - 2P + (4 x 25) = 300 - 2P + 100
Q = 400 - 2P
In equilibrium, quantity demanded equals quantity supplied.
400 - 2P = 3P - 50
5P = 450
P = 50
Q = 400 - (2 x 50) = 400 - 100 = 300
(b) When I = 50, Demand: Q = 300 - 2P + (4 x 50) = 300 - 2P + 200 = 500 - 2P
Equating quantity demanded and quantity supplied,
500 - 2P = 3P - 50
5P = 550
P = 110
Q = 500 - (2 x 110) = 500 - 220 = 280
NOTE: As per Chegg Answering guideline, 1st question is answered.
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