Purchase Solution

# Econ omics : Minimum/Maximum Price

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The general demand and supply functions for good A are estimated to be, respectively:
Qd = 52.50 - 2.0P + 0.015M + 7.0PR
Qs = -500.0 + 8.0P

Where: Qd is quantity demanded per month, Qs is quantity supplied per month, P is price of good A,M is average household income, and PR is the price of a related good R. Assume the following values of the variables: M = \$42,500, and PR = \$30.

a. What is the maximum price at which 500 units of good A can be sold?

b. What is minimum price producers will accept to supply 500 units of good A?

c. If the market price is \$150, what follows in the market for this product?

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a. What is the maximum price at which 500 units of good A can be sold?

Qd = 52.50 - 2.0P + 0.015(42500) + 7.0(30) = 52.50 - 2.0P + 637.5 + 210 = 900 - ...

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