PLEASE ANSWER MORE STEP BY STEP, The equtaion is Qd=25-P^2 Qs=-3+3P The market f
ID: 1180335 • Letter: P
Question
PLEASE ANSWER MORE STEP BY STEP,
The equtaion is Qd=25-P^2
Qs=-3+3P
The market for crayons has the following demand and supply curves: 2 Qd=25-P Qs = -3 + 3PFind the equilibrium price and equilibrium quantity transacted in this market. Considera demand shock that keeps the price of this commodity at $3.50. Would this create a condition of excess demand or excess supply? How much would this "excess" be if in fact it does exist? Suppose the adoption of a new technology improves the efficiency of producing this commodity by 3 units, discuss the impact on the equilibrium values established in part (a) of this question. Assume that a shift in consumer preferences reduced the consumption of this commodity by two units (prior to the induced technological innovation) how would this affect equilibrium price and equilibrium quantity transacted?Explanation / Answer
(a) the equilibrium point is reached when Qd = Qs. Therefore set 25-p^2=-3+3p to get P*=$4 and -$7 but we will need to omit -$7 as the answer is not a whole number. The equilibrium price is $4. then plug P* back into either one of the equations and solve for Qs or Qd. You get that at the price of $4, Q* is 9.
(b)The price control will be set at a lower price than the equilibrium price thus quantity supplied will be less than the quantity demanded and so there will be a shortage. Excess demand. The excess can be calculated by plugging in $3.50 into your Qs and Qd equations to see how much is being demanded and how much companies are supplying. you get that Qd=12.75 and Qs= 7.50 Conclusion, at a price of $4 the quanitity suplied will be 7.5 and the quantity demanded will be 12.75 (rounding up or down depends on what the book/ instructor prefers).
(c) a technological improvement will shift supply to the right three units. The equilibrium quanity increases and price decreases
(d) a decrease in demand will shift the demand curve to te left by two units. equilibrium quanitity decreases and the price will also decrease.
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