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    Equilibrium Price and Quantity Demand

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    Show the equilibrium price and quantity for a given supply and demand curve and graph their relationship.

    Annual demand and supply for the Electronic firm is given by:
    QD = 5,000 + 0.5 I + 0.2 A - 100P, and
    QS = -5000 + 100P
    Where, Q is the quantity per year, P is price, I is income per household, and A is advertising expenditure.

    a. If A = $10,000 and I = $25,000, what is the demand curve?
    b. Given the demand curve in part a., what is equilibrium price and quantity?
    c. If consumer incomes increase to $30,000, what will be the impact on equilibrium price and quantity?

    © BrainMass Inc. brainmass.com October 10, 2019, 7:23 am ad1c9bdddf
    https://brainmass.com/economics/equilibrium/equilibrium-price-quantity-demand-579874

    Solution Preview

    Please view the attached Word document for the required graph.

    Qd = 5,000 + 0.5I + 0.2A - 100P
    Qs = -5,000 + 100P

    a) If A = $10,000 & I = $25,000
    Qd = 5,000 + 0.5 (25,000) + 0.2 (10,000) - 100P
    = 5,000 + 12,500 + 2,000 - 100P
    = 19,500 - 100P

    b) Qd = 19,500 - 100P
    Qs = -5,000 + 100P
    At equilibrium: Qd = Qs

    Therefore,
    19,500 - 100P = -5,000 +100P
    200P = ...

    Solution Summary

    This posting provides a thorough, step by step analysis illustrating how to solve for this equilibrium price problem. All required work is provided, along with a Word attachment with the required graphing.

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