2. In economics, the supply of a product is the quantity or that product suppler

Question

2. In economics, the supply of a product is the quantity or that product supplers are willing to provide at a given price. In theory, the quantity supplied of a product increases, if the price of that product increases. Suppose that there is a linear relationship between the quantity supplied, S, of the product described in problem 8 and its price, p. The quantity supplied weekly is 100 when the price is $2 and the quantity supplied rises by 50 units when the price rises by $0.50, a) Find a formula for S in terms ofp.

Explanation / Answer

2)

given quantity supplied rises by 50 units when price rises by $ 0.50

=>S/p =50/0.50

=>S/p =100 units per dollar

since the relationship is linear , slope of line is constant

so slope of required function =100 units per dollar

a)

line contains point (2,100)

so using point slope form

S-100 =100(p-2)

=>S-100 =100p- 200

=>S=100p -100

b)

slope implies that , for a unit change in price ,the supply changes by 100 units

if price increases , supply increases
if price decreases , supply decreases

c)

when supplier will not be able to provide , the supply becomes zero

=>S=0

=>100p -100=0

=>p=1

below the unit price of $ 1, supplier will not be able to provide any supply

d)

demand function is not given.

for maket clearing price just equation supply function in p with demand function in p, and then solve for p

please rate if helpful. please comment if you have any doubt

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