ECO 401 ass. sol.# 1

ECO401 Ass # 1Idea Solution
A


(1)

P=8

Q(d)=850-15(p)

Q(s)=400+30(p)

Put price in q(d) and q(s)

Q(d) Q(s)

=850-15(p) =400+30(P)

=850-15(8) =400+30(8)

=850-120 =400+240

=730 =640

(2)

shortage production because Q(d) is high and Q(s)low is low eight is not equilibrium price

(3) Shortage will increase price



(B)

Equilibrium price

Q(d)=Q(s)

850-15(p)=400+30(p)

45p=450

p=450/45

p=10

Equilibrium price =10

Here demand and supply is equal



(C)

Equilibrium proved

Q(d)=Q(s)

850-15(p)=400+30(p)

850-15(10)=400+30(10)

850-150=400+300

700=700