There has been a change in the market (represented in Q = 100 – 4.6P and Q = 75

Question

There has been a change in the market (represented in  Q = 100 – 4.6P    and Q = 75 + 6.2P ). The change is represented by the following two equations. Circle the one correct conclusion that describes the market change.

                                    Q = 85 + 6.2P   and Q = 100 – 4.6P

POSSIBLE ANSERS

2 a. demand has decreased

b. demand has increased

c. supply has decreased

d. supply has increased

e. supply has decreased and demand has decreased

f. supply has increased and demand has increased

Explanation / Answer

When we compare the two set of equations we find that demand function is still unchanged at Q = 100 – 4.6P. While the supply function is changed from Q = 75 + 6.2P to Q = 85 + 6.2P with a constant slope 6.2. Intercept has changed from 75 to 85, and it is increased by 10. Hence we conclude that the supply function has increased.

Select d. supply has increased

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