Question

1) Suppose the market for potatoes can be expressed as follows: Supply: s = -20 +...

1) Suppose the market for potatoes can be expressed as follows: Supply: s = -20 + 10p Demand: d = 400 - 20p a) Solve for the equilibrium price and quantity. b) Solve for the equilibrium when the demand increases to d = 430 - 20p.

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Answer #1

a ) Equilibrium price = $14 and equilibrium quantity = 120

Explanation:

S = -20 + 10P

D = 400 -20P

At equilibrium , D = S

400 -20P = -20 +10P

30P = 420

P = 420 / 30 = $ 14

Equilibrium Quantity = 400 -20P

= 400 - 20 (14)

=400 - 280 = 120

b ) Equilibrium price = $15 and equilibrium quantity = 130

Explanation:

S = -20 + 10P

D = 430 -20P

At equilibrium , D = S

430 -20P = -20 +10P

30P = 450

P = 450 / 30 = $ 15

Equilibrium Quantity = 430 -20P

= 430 - 20 (15)

=430 - 300 = 130

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