Introduction to Economics –ECO401 Assignment No 1 Idea Solution Fall 2010

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Question No .A
(1)
P=8
Q(d)=850-15(p)
Q(s)=400+30(p)
Put price in q(d) and q(s)
Q(d) Q(s)
=850-15(p) =400+30(P)
=850-15(8) =400+30(8)
=850-120 =400+240
=730 =640
(2)
shortage production because Q(d) is high and Q(s)low is low eight is not equilibrium price
(3) Shortage will increase price

(B)
Equilibrium price
Q(d)=Q(s)
850-15(p)=400+30(p)
45p=450
p=450/45
p=10
Equilibrium price =10
Here demand and supply is equal

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Equilibrium proved
Q(d)=Q(s)
850-15(p)=400+30(p)
850-15(10)=400+30(10)
850-150=400+300
700=700

(D)

Graphical
Price Quality demand Quality supply
9 715 670
10 700 700
11 685 730