Demand: Qd=900-60P Supply:Qs=-200+50P Equilibrium price and output are a.P=$7 an

Question

Demand: Qd=900-60P

Supply:Qs=-200+50P

Equilibrium price and output are

a.P=$7 an Q=480

b.P=$10 and Q=300

c. P=$20 and Q=150

d.P=$100 and Q=$5,300

e. None of the above

If the price is currently $11, there is:

a. surplus of 110 units

b. shortage of 240 units

c. surplus of 350 units

d. shortage of 700 units

e. none of the above

Let supply remain constant, an increase in income causes consumers to be willing and able to buy 220 more units at each price than they were previously. The new equilibrium price and quantity are:

a. P=$10 and Q=520

b. P=$12 and Q=400

c. P=$10 and Q=80

d. P=$15 and Q=600

e. none of the above

Explanation / Answer

1. b) P=$10 and Q=300

Qd = Qs => 900-60P = -200+50P => 1100P=110 => P = 10

Q = -200 + 50(10) = 300

2. a) surplus of 110 units

P = 11

Qd=900-60(11)=240

Qs=-200+50(11)=350

Qs-Qd=350 - 240=110

3. b) P=$12 and Q=400

Qd=900-60P+220

Qs=-200+50P

Qd = Qs => 900-60P+220 = -200+50P => 1320P=110 => P = 12

Q = -200 + 50(12) = 400

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