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Price equilibrium and demand curve

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Discuss how each of the following will affect the price and quantity of equilibrium. To determine the new values, discuss how the supply and/or demand curves will shift in the following cases (if at all).
a. Income diminishes and the good is a normal good.
b. Minimum wage increases

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Discuss how each of the following will affect the price and quantity of equilibrium. To determine the new values, discuss how the supply and/or demand curves will shift in the following cases (if at all).

a.Income diminishes and the good is a normal good.

A person's preference of a good can be characterized as normal or inferior. A ...

Solution Summary

This solution discusses the effect of diminishing income on the price and quantity of equilibrium. Besides the effect of minimum wage on price and quantity of equilibrium is also discussed.

$2.19
See Also This Related BrainMass Solution

A tutorial that explains how to calculate the Equilibrium price of a product, cross price elasticity of demand, Income elasticity of Demand and Elasticity of Demand.

The tutorial also explains how to determine the exogenous and endogenous variables in a function.

1. Suppose the market demand curve for a Product is given by Q = 250 - 5P and the market supply curve is given by Q = -50 + 25P.
1. What are the equilibrium price and quantity in this market?
2. At the market equilibrium, what is the price elasticity of demand?
3. Suppose the price in this market is $8. What is the amount of excess demand?

2. Suppose the market demand curve for a product is given by Q = 500 - 156P + 20I and the market supply curve is given by Q = -25 + 10P - 10K. Assume initially that I= 10 and K = 5.
1. What are the equilibrium price and quantity in this market?
2. What are the endogenous and exogenous variables in the equilibrium model?
3. Suppose K suddenly increases to 20. How will this affect the market equilibrium calculated in part 1?

3. Suppose demand for good A is given by Q = 500 - 10Pa + 2Pb + 0.70I where Pa is the price of Good A, Pb is the price of some other good B, and I is income. Assume that Pa is currently $10, Pb is currently $5, and I is currently $100.
1. What is the elasticity of demand for good A with respect to the price of good A at the current situation.
2. What is the cross price elasticity of the demand for good A with repect to the price of good B at the current situation?
3. What is the income elasticity of demand for good A at the current situation.

4. Suppose the market demand curve for a product is given by Q = 500 - 5P and the market supply curve is given by Q = 20P
1. What are the equilibrium price and quantity in this market?
2. Now suppose that the new demand curve for the same product is given by Q = 1000 - 5P and the market supply curve remains unchanged. What are the new equilibrium price and quantity in this market.

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