Question

Quantitative Problem

Suppose the demand function for a new smartphone can be expressed as QD = 1000 – 1.5P with QD being quantity demanded and P being price. The supply function can be expressed as QS = 50 + 2P

Fill out the following table using the above equations:

Price Quantity Quantity   Surplus

Demanded Supplied Amount

    or Shortage

Amount

200

220

240

260

280

300

320

340

Now answer the following questions:

What is the equilibrium price? You can compute this either using Microsoft Excel, or by using algebra from the equations above and solving for a price where quantity supplied equals quantity demanded. Show your work by either showing the algebra steps or by showing how you used Excel to calculate.

Suppose the supply function changes to 100 + 2P. What is the new equilibrium? Show your work by either showing the algebra steps or by showing how you used Excel to calculate.

Answer 1