Question

The market demand for economics books is:

Q_D = 100P^-0.5 I^0.5

where Q is quantity, P is price, and I is the average consumer's income.

The market supply of economics books is:

QS = 400P^0.5w^-1.0

where w is the hourly wage of the economists who write the books.

If I = 100 and w = 10, what will be the equilibrium price and quantity of books? Graph your results.

Answer 1

The equation is something like this

And,

Given, I = $ 100, and w = $ 10

Plug in these values in the demand and supply functions we get

Now, in case of supply function

At equilibrium Q's = Qd

Solving for P we get

P = $ 25 per unit

Q = 500 units

I still have doubt about the equation please check whether the equation used by me is correct or not. please contact me through comment.