Demand and Supply - Equilibrium
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Starting with the market demand and supply functions,
QD = 10,000 - 1,000P
QS = -2,000 + 1,000P
Determine algebraically the new equilibrium price and quantity if (a) the demand function changes to QD' = 12,000 - 1,000P or to QD" = 8,000 - 1,000P, or (b) the market supply function changes to QS* = -4,000 + 1,000P or to QS** = 1,000P.
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(a)
Demand function changes to QD' = 12,000 - 1,000P
At Equilibrium QD' = 12,000 - 1,000P = QS = -2000 + 1000P
=> 12,000 + 2,000 = 1,000P + 1,000P
=> 7 = P
Putting P=7 in any of the equation we get Quantity = 12,000 - 1,000*7 = ...
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