Share
Explore BrainMass

Calculating equilibrium price and quantity level

The market demand and supply functions of copper are as follows:
QD = 10 -50PC + 0.3I + 1.5TC + 0.5E where:
QD = quantity demanded of copper (millions of pounds)
PC = price of copper ($ per pound)
I = consumer income index
TC = telecom index
E = expectation index
QS= -86 + 90PC รข?" 1.5W + 0.5T + 0.4N where:
QS = quantity supplied of copper (millions of pounds)
PC = price of copper ($ per pound)
W = an index of wage rates in the copper industry
T = technology index
N = number of active mines in the copper industry.

(A) Given the following values for the non-price variables, find the market equilibrium price (PE) and quantity (QE):
I = 100, TC=10, E=30, W=10, T=30, N=40

(B) Discuss the impacts on the market equilibrium price (PE) and quantity (QE) of a 10 percent increase in consumer income index.

Solution Preview

(A) Given the following values for the non-price variables, find the market equilibrium price (PE) and quantity (QE):
I = 100, TC=10, E=30, W=10, T=30, N=40

QD = 10 - 50PC + 0.3I + 1.5TC + 0.5E
Put various values of given parameters
QD=10-50PC+0.3*100+1.5*10+0.5*30=70-50PC

QS= -86 + 90PC- 1.5W + ...

Solution Summary

Solution describes the steps to calculate equilibrium price and quantity level. It also analyzes the impact of a rise in income level on equilibrium parameters.

$2.19