Question

ndogenous, exogenous variables; Slope of a line - Equilibrium in the market-place means that quantity supplied (Qs) equals quantity demanded (Qd). Consider the following market where quantity demanded and quantity supplied are res given respectively: QS = -8 + 4P and Qd = 42–6P. It follows that the equilibrium price ( Pe) = _________. In the context of the supply and demand model, the two variables (Qd and Qs) are referred to as ____________ variables (endogenous; exogenous). Explain your answer. The numerical value for the slope of the demand curve is ____________ and that for the slope of the supply curve is _____________ [ Hint : When the supply and the demand curve are graphed, price (P) is placed on the vertical axis and quantity (Q) is placed on the horizontal axis. Therefore, the slope (∆P/∆Q) is just the reciprocal (inverse) of the price coefficient].

Answer 1

Equilibrium in the market-place means that quantity supplied (Q_s) equals quantity demanded (Q_d)

Therefore, Q_d=Q_s

-8+4P=42-6P

P=5

Equilibrium Price(P_e)=5

In the context of the supply and demand model, the two variables (Qd and Qs) are referred to as endogenous variables,

An endogenous variable is one that is explained within our analysis. When using the supply-and-demand framework, price and quantity are endogenous variables,which means they are controlled for within the model; everything else is exogenous.

Demand Curve : Q_d= 42-6P

Slope= -6

Change in Quantity(∆Q)(horizontal axis intercept)=42

Change in Price(∆P)(horizontal axis intercept)=7

Slope=- (42/7)= -6

Supply Curve : Q_S= -8+4P

Slope:4

Change in Quantity(∆Q)=-8

Change in Price(∆P)=2

Slope= -(-8/2)= 4