Question

The market for DVDs has supply and demand curves given by Ps = 2Qs and Pd...

The market for DVDs has supply and demand curves given by Ps = 2Qs and Pd = 42 - Qd, respectively.

a) How many units will be traded at a price of $35.00?

b) Which participants will be dissatisfied at a $35 price (sellers or buyers)?

 (Click to select)SellersBuyers

c) How many units will traded at a price of $14?

d) Which participants will be dissatisfied at a $14 price (sellers or buyers)?

 (Click to select)SellersBuyers

e) What quantity of DVDs will be sold in equilibrium?

f) What price will the DVDs be sold in equilibrium?

g) What is the total revenue from DVD sales at equilibrium?
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Homework Answers

Answer #1

In equilibrium

Demand= supply

42-Q=2Q

42=Q+2Q

42=3Q

Q=42\3

Q=14

Substituting Q into supply equation

P=2*14

=28

a. At P=35

35=2Qs

Qs=35\2

Qs=17.5

Qd=42-35

Qd=7

It means only 7 units are traded.

b.

The buyer will be dissatisfied because price is above equilibrium and there is surplus.

C.

When P=14

Qs=P\2

=14\2

=7 units

Qd=42-14

Qd=28

It means only 7 units are traded.

D.

Since sellers are getting below equilibrium price, so seller will be dissatisfied.

E. Equilibrium quantity is 14 units.

F.

Equilibrium price=28

G.

TR=P*Q

=14*28

=392

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