Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

Exercise 36

This problem involves solving demand and supply equations together to determine price and quantity.
a. Consider a demand curve of the form
Q D = 2P + 20
where Q D is the quantity demanded of a good and P is the price of the good. Graph this demand curve. Also draw a graph of the supply curve
Q S = 2P ? 4
where Q S is the quantity supplied. Be sure to put P on the vertical axis and Q on the horizontal axis. Assume that all the Q S and Ps are nonnegative for parts a, b, and c. At what values of P and Q do these curves intersect- that is, where does Q D = Q S ?
b. Now suppose at each price that individuals demand four more units of output-that the demand curve shifts to
Q D ' = ?2P + 24
Graph this new demand curve. At what values of P and Q does the new demand curve intersect the old supply curve-that is, where does Q D ' = Q S ?
c. Now, finally, suppose the supply curve shifts to
Q S ' = 2P ? 8
Graph this new supply curve. At what values of P and Q does Q D ' = Q S '? You may wish to refer to this simple problem when we discuss shifting supply and demand curves in later sections of this book.