Use the following general linear supply function: $Q _ { 5 } = 40 + 6 P - 8 P _ { I } + 10 F$ where $Q _ { 5 }$ is the quantity supplied of the good,P is the price of the good, $P _ { I }$ is the price of an input,and F is the number of firms producing the good.Suppose $P _ { I }$ = $40,F = 50,and the demand function is $Q _ { d } = 700 - 6 P$ ,then if government sets a price of $50 what will be the result?

Question

Quizplus · Accepted Answer

To find the result, we first calculate the quantity supplied ($Q_s$) and the quantity demanded ($Q_d$) at the government-set price of $50. Using the given supply function $Q_s = 40 + 6P - 8P_I + 10F$, with $P = 50$, $P_I = 40$, and $F = 50$, we get $Q_s = 40 + 6(50) - 8(40) + 10(50) = 40 + 300 - 320 + 500 = 520$. Using the demand function $Q_d = 700 - 6P$, with $P = 50$, we get $Q_d = 700 - 6(50) = 700 - 300 = 400$. Since $Q_s > Q_d$, there is a surplus, and the surplus amount is $Q_s - Q_d = 520 - 400 = 120$.

Use the Following General Linear Supply Function Q5=40+6P−8PI+10FQ _ { 5 } = 40 + 6 P - 8 P _ { I } + 10 FQ5​=40+6P−8PI​+10F

Use the Following General Linear Supply Function $Q _ { 5 } = 40 + 6 P - 8 P _ { I } + 10 F$