I cannot seem to answer questions 2, 3 or 4. Please help (see attached file).© BrainMass Inc. brainmass.com October 9, 2019, 10:10 pm ad1c9bdddf
Please refer to the attachment.
(2) Consider the market for commodity X described by the demand and supply equations below
Qd = 5 + 2P
Qs = -10 + 5P.
(a) Briefly comment on the behavior of economic agents in this market.
Since the slope of the demand function is positive (i.e., 2), the quantity demanded will be increase when the price of the product rises. Therefore, commodity X is a Giffen (inferior) good.
(b) Graph the demand and supply curves and find equilibrium price and equilibrium quantity.
Rewrite the demand and supply into:
P = - 2.5 + 0.5Qd
P = 2 + 0.2Qs
At the equilibrium, Qd = Qs
Then 5+2P = -10+5P
15 = 3P
P = 5
Substitute into demand: Q = 5+2*5 = 15
(c) Determine the stability of this market in both the Wakwian and Marshallian sense.
In Marshall, the variable that adjusts is quantity, and the demand and supply price are related to the quantities. It is the quantity that changes to reach equilibrium
However, Walras saw price as the variable ...
The solution graphs the demand and supply curves and find equilibrium price and equilibrium quantity.