Suppose demand and supply are given by Qd = 14 -1/2P and Qs = 1/4P - 1.
a. What are the equilibrium quantity and price in this market? Show your work?
1. Draw the demand and supply graph and label all initial points ( D0, S0, P0, E0), following the use of comparative statics given your text on pages 62-65)
2. Set demand equal to Supply and solve the values. See page 62 for a practice problem
3. Next, insert the values in the graph.
For the full solution, please see the 2 pdf files attached.
Question 1a) Hint Step 1) Draw the Price axis as the vertical axis. Draw the Quantity axis as the horizontal axis. Find the Price and Quantity axis intercepts of the Qd and Qs functions given.
When P = 0, Qd = 14.
When Qd = 0, P = 28.
Use these intercepts to sketch the Qd curve.
When P = 0, Qs = -1.
When Qs = 0, P = 4.
Use these intercepts to sketch the Qs curve.
Usually, the symbols D0 and S0 are used to label the demand and supply curves; ...
A detailed, step-by-step solution to the two problems is given. The solution includes a labeled graph, calculations, and over 350 words of text.