economics: equilibrinum price
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Given these demand and supply curves,
Q = 70 2P Demand
Q = 10 + P Supply
Solve for equilibrium price and quantity.
The demand curve shifts in to the left by 15 units. Solve for the new equilibrium price and quantity.
$ MC
ATC
P D = AR = MR
Q1 Q2 Q3 Quantity
How much output should this perfect competitor produce? At that level of output, is the firm making an economic profit, an economic loss or breaking even?
Price
Coordinates are (P, Q)
Price first, Quantity second.
A o (10, 5)
B o (6, 8)
Demand
Quantity
Starting at A on the demand curve above, what is the price elasticity of demand in moving from A to B?
Han
Limit price
Monopoly price
Coa
Limit price
1.5, 3.0
2.5, 2.0
Monopoly price
1.0, 4.0
1.75, 3.0
(Payoffs are in billions of dollars.)
This is the game from Assignment #3. The industrys best outcome is the bottom left cell, where total profits are 1.0 + 4.0 = 5.0, and the only way to get there is through an agreement.
What do you think the negotiated payoff to each firm would be in such an agreement?
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Solution Summary
The problem deals with concepts in economics for equilibrium prices.
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QUESTION
1. Given these demand and supply curves,
Q = 70 - 2P Demand
Q = 10 + P Supply
a. Solve for equilibrium price and quantity.
b. The demand curve shifts in to the left by 15 units. Solve for the new equilibrium price and quantity.
TUTORIAL
1.
The equilibrium price is the price at which demand, for a product and its supply are equal.
Q = 70 - 2P Demand (1.0)
Q = 10 + P Supply (1.1)
Substituting Q as 70 - 2P in (1.1) we get:
70 - 2P = 10 + P Supply (1.2)
Aggregating similar like terms together we get,
70 - 10 = P + 2P Supply
3P = 60
P = 20
Substituting P as 20 in (1.0), we get,
Q = 70 - 2(20)
Q = 30
The equilibrium quantity is then 30 units.
B.
The shift in the demand curve means that the units for each demand will reduce by 15. The demand equation then changes from 70 - 2P to (70 - 15) - 2P.
Q = 55 - 2P Demand (1.3)
Q = 10 + P Supply (1.4)
Substituting P as Q - 10 in (1.3), we get,
Q = 55 - 2(Q - 10)
Q = 55 - 2Q + 20
Q + 2Q = 55 + 20
Q = 75/3
Q = 25
QUESTION
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Education
- B. Sc., University of Nigeria
- M. Sc., London South Bank University
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