# Equilibrium and Quantity.

Solve for equilibrium and quantity.

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Given: Monthly quantity demand function for a product is Qd = 10,000-80P and monthly quantity supply function for a product is Qs=20P.

If you put down: 2000 as the answer. That means nothing to me. Where did you get that? Random? I have no way to know. To arrive at that answer, you would have had to work through a bunch of steps so include those!

Here is an example of how to present you work on this problem which would allow me to follow your steps:

1)    Qd=Qs   which is also equal to:

2)    10,000 – 80P = 20P

Next add 80P to both sides and divide by 100 to get:

10,000 =100p

Divide by 100 to get P by itself:

100 = P

This is equilibrium price.

Next, you need equilibrium quantity.

Plug the equilibrium price (100) into either  demand or supply function.

If we plug it into the demand function you get:

Qd= 10,000 – 80*100 = 2,000

(80*100 is 8,000 and 10,000 minus 8,000 is 2,000)

If you plug it into the supply function you get:

Qs = 20*100 = 2,000

Here, the quantity supplied is equal to the quantity demanded. Yea! We did it right.

Questions 1-4

1. Quarterly demand and supply for the Petram Company is given by Qd = 1000 + 0.5M + 0.25A – 100P and Qs = -750 + 100P, where Q is quantity per quarter, P is price, M is income, and A is advertising expenditure. Suppose that A = 1000 and M =20,000, and answer the following questions.

A. What is the equilibrium price and quantity?

B. What is the inverse demand?

2. Consider the following benefit and cost functions: B(X) = 600X -12X2 and C(X) = 20X2. Use this information to answer the following questions.

What are the MB and the MC?

What level of X maximizes the net benefit?

What is the net benefit (NB)?

3. Consider the market demand and supply given by the following: Qd = 50 – P and Qs = 2.5 + 1.5P. Use this information to answer the following questions.

A. What is the equilibrium price and quantity?

B. If the government sets a price floor of \$25, what is the surplus/shortage? If the government buys the surplus, what would be the cost to the government?

4. Consider a market supply and demand represented by the following: Qs = 4P – 120 and Qd = 1000 – 10P. Use this information to answer the following questions.

A. Calculate equilibrium price and quantity.

B. What is the consumer surplus?

C. If the government imposes an excise tax of \$2, what would be the new equilibrium price, quantity?

D. What would happen to the consumer surplus?