SOLUTION: Suppose that the demand and supply in the automobile market are represented by the following equations:
Demand: P= 10 - 0.2Qd
Supply: P=2 + 0.2Qs
a. Determine the equilib
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-> SOLUTION: Suppose that the demand and supply in the automobile market are represented by the following equations:
Demand: P= 10 - 0.2Qd
Supply: P=2 + 0.2Qs
a. Determine the equilib
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Question 1201754: Suppose that the demand and supply in the automobile market are represented by the following equations:
Demand: P= 10 - 0.2Qd
Supply: P=2 + 0.2Qs
a. Determine the equilibrium price and quantity.
b. Demonstrate your answer graphically.
c. Suppose the price of petrol increases, demonstrate graphically its effect on the equilibrium point.
d. Assume that there is a technological improvement on the cars’ production, what will be its effect on the cars’ market?
They want you solve this system of two equations in two unknowns
P = 10 - 0.2Q (1)
P = 2 + 0.2Q (2)
Since left sides are identical, right sides are equal
10 - 0.2Q = 2 + 0.2Q
10 - 2 = 0.2Q + 0.2Q
8 = 0.4Q
Q = 8/0.4 = 80/4 = 20.
ANSWER. Q = 20; P = 10 - 0.2Q = 10 - 0.2*20 = 10 - 2*2 = 10 - 4 = 6.
Solved.
Do the rest on your own.
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