Question

The supply curve in a market is given by P = 13 + 1.5(Q). The first demand curve (D ₁) is P = 52 - 2.0(Q), while the second demand curve (D ₂) is P = 36.4 - 2.0(Q).

The change in price is a decrease of $____.

	A.
	B.
	C.
	D.
	E.
	F.
	G.

Answer 1

Supply curve : P= 13+ 1.5 Q

Demand curve : P= 52- 2Q

By equating demand and supply we get :

13 +1.5 Q= 52- 2Q

3.5Q= 39

Q = 11.14 (Equilibrium quantity)

P= 13+1.5(11.14)

P= $ 29.71 (Equilibrium price)

Now,the demand curve is P=36.4 - 2Q

Equate demand and supply we get :

13+1.5Q = 36.4- 2Q

3.5Q = 23.4

Q = 6.69 (New equilibrium quantity)

P= 13+ 1.5(6.69)

P=$ 23.03 (New equilibrium price)

This implies that the change in price is a decrease of $(29.71- 23.03)= $6.68.