Suppose the demand for eggs is: Q=8,000-3,000P and the supply of eggs is: Q= -50

Question

Suppose the demand for eggs is: Q=8,000-3,000P and the supply of eggs is: Q= -500+2,000P, where quantity is measured in millions (of eggs).

Find the market-clearing price and quantity for eggs. (Enter price responses rounded to two decimal places.)

The market-clearing price is $___ and the market-clearing quantity is ___ million eggs.

Now suppose the cost of producing eggs increases such that the supply curve for eggs shifts to Q= -1,000+2,000P. Find the market-clearing price and quantity for the product.

The market-clearing price is $___ and the market-clearing quantity is ___ million eggs.

Explanation / Answer

(a)

Qd = 8000 - 3000P

Qs = - 500 + 2000P

Markets clear when Qd = Qs

8000 - 3000P = - 500 + 2000P

5000P = 8500

P = $1.70

Q = - 500 +3400 = 2900 (million)

(b)

Qd (unchanged) = 8000 - 3000P

Qs = -1000 + 2000P

Setting Qd = Qs,

8000 - 3000P = -1000 + 2000P

5000P = 9000

P = $1.8

Q = - 1000 + 3600 = 2600 (million)

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