Consider a demand function P = 10 – 2Qd + Y, and the supply function P = 3 + Qs

Question

Consider a demand function P = 10 – 2Qd + Y, and the supply function P = 3 + Qs - w, where P is the market price, Qd is the quantity demanded, Qs is the quantity supplied, Y is the income, w is the labor cost. What are the demand curve and supply curve when Y = 2 and w = 1. Draw those curves. What are the equilibrium quantity and equilibrium price? What happens to the demand curve if the income increases by 1 and the supply curve if labor cost increases by 2. What are the new equilibrium price and quantity after the changes?

Explanation / Answer

new equilibrium point is 56 units

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