Question

A demand curve and supply curve for video games are given respectively as follows: QD= 72‒...

A demand curve and supply curve for video games are given respectively as follows:

QD= 72‒ 2P + 2M

QS = 8 + P

Where M represents consumer income. Suppose that last year, consumer income was M= $40. Find the equilibrium price and quantity of video games at that income level. In addition, suppose that this year, consumer income is M= $55. Find the equilibrium price and quantity of video games at this new income level. Draw the graph of both the demand and supply curves before and after the change in income. Clearly label any shifts or movements, as well as all curves and equilibrium points as well as numerical values for the equilibrium prices and quantities.

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