The market for matsutake mushrooms is characterized by the following demand and supply equations: Q^D = 100 - P and Q^S = -50 + 2P, where Q is measured in pounds and P is measured in price per pound. If a new fertilizer increases the quantity supplied by 30 pounds at every price, the equilibrium price changes from ______ to _____.

Question

Quizplus · Accepted Answer

The original equilibrium is found by setting the original supply and demand equations equal to each other: 100 - P = -50 + 2P, solving for P gives P = $50. With the new fertilizer, the supply equation becomes -50 + 2P + 30, or -20 + 2P. Setting the new supply equal to the original demand, 100 - P = -20 + 2P, solving for P gives P = $40. Thus, the equilibrium price changes from $50 to $40.

The Market for Matsutake Mushrooms Is Characterized by the Following