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Equilibrium price and quantity is expressed.

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If demand is represented by Qd = 50 -.5P +.005I where I=$50,000 and supply is represented by Qs = 100 +.4P - 2W where wages=W=$15.00, compute the equilibrium price and quantity. where wages=W=$15.00, compute the equilibrium price and quantity. What happens if income falls to I=$40,000?

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Solution Preview

Let's first plug in I and W

Qd = 50 - 0.5P + 0.005(50000) = 300 - 0.5P

Qs = 100 + 0.4P - 2(15) = 70 + 0.4P.

At ...

Solution Summary

This solution shows how to calculate equilibrium price and quantity in the context of the given questions.

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