1. Given a demand function Qd 60 10P and a supply function Qs 10P, find the equi

Question

1. Given a demand function Qd 60 10P and a supply function Qs 10P, find the equilibrium quantity and price. Answers are in numbers. A. Q=20; P-2 B. Q-30; P-3 C. Q-20; P-3 D. Q-30; P = 2 2. A market is modeled by the following demand and supply functions: Qd-60 -10P and Qs-10P. If P-S5, determine if there is an equilibrium, excess supply (surplus), or excess demand (shortage). Answers are in numbers A. 0 (Equilibrium) B. 20 (Surplus) C. 40 (Surplus) D. 20 (shortage) 3. An increase in both demand and supply will . A. Increase quantity, and increase price B. Decrease quantity, and decrease price C. Increase quantity, and may increase, reduce or leave price unchanged D. Decrease quantity, and may increase, reduce or leave price unchanged 4. A decrease in demand and an increase in supply will A. Reduce price but may increase, decrease, or leave quantity unchanged B. Increase price but may increase, decrease, or leave quantity unchanged. C. Reduce price but increase quantity D. Increase price but reduce quantity

Explanation / Answer

Q1
Answer
The equilibrium is at Qd=Qs
equating both equations
60-10P=10P
20P=60
P=3
Q=10*3=30
Option B
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Q2
Answer
Qd=60-10*5=10
Qs=10*5=50
Qs>Qd there is surplus
Surplus=Qs-Qd=50-10=40 units
Option C
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Q3
Option C
The increase in demand increases price and quantity both, the increase in supply increases quantity but decreases price so in total quantity increases but the price effect is unknown without proper calculations

Q4
Answer
Option A
The decrease in demand decreases both
The increase in supply increases the quantity and decreases the price
so in total price decreases but quantity is unknown

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