For each of the following sets of supply and demand curves, calculate equilibrium price and quantity.
a. QD = 2000 - 2P: QS = 2P
b. QD = 500 - P: QS = 50 + P
c. QD = 5000 - 10P: QS = -1000 + 5P
Annual demand and supply for the Entronics company is given by:
QD = 5,000 + 0.5 M + 0.2 A - 100P, and QS = -5000 + 100P
where Q is the quantity per year, P is price, M is income per household, and A is advertising expenditure.
a. What is the value of the slope parameter for the price of the good? Does it have the correct algebraic sign? Why?
b. If A = $10,000 and M = $25,000, what is the demand curve?
c. Given the demand curve in part b, what is equilibrium price and quantity?
d. If consumer incomes increase to $30,000, what will be the impact on equilibrium price and quantity?