Question

1. Demand and supply curves can be represented with equations. If Qd = 90 - 2P and Qs = P, then equilibrium price P* and equilibrium quantity Q* are

a. P* = 30, Q* = 60

b. P* = 60, Q* = 30

c. P* = 30, Q* = 30

d. P* = 60, Q* = 60

2.

Suppose that scientists find evidence that coffee consumption lowers cholesterol. If so,

a. demand for coffee would remain the same

b. quantity demanded of coffee would decrease

c. demand for coffee would increase

d. demand for coffee would decrease

Answer 1

1.

Qd = 90 - 2P

Qs = P

Equilibrium:

Qd=Qs

90-2P=P

90= 3P

P*= 90/3= 30 Equilibrium price

Use this supply equation:

Q*=P*= 30 Equilibrium quantity

Option c is the correct answer.

2.

If the price of the commodity cause rise or fall in demand then it is called as Change in Quantity demand.

If the price of the commodity remain same and other factors cause rise or fall in demand then it is called as Change in demand.

Suppose that scientists find evidence that coffee consumption lowers cholesterol this means that now people will prefer to consume more coffef which means demand for coffee increases while price remain same.

c. demand for coffee would increase is the correct answer.