The demand for DVD players in a country is given by D = 300 - 0.2P,where P is the price of a DVD player.Supply by domestic producers is given by S = 100 + 0.8P.The world price of a DVD player equals $100.In equilibrium,when this economy is closed to trade,the quantity of DVD players demanded domestically equals _________,and when this economy opens to trade,the quantity of DVD players demanded domestically equals __________.

Question

Quizplus · Accepted Answer

To find the equilibrium quantity of DVD players demanded domestically when the economy is closed to trade, we set D equal to S and solve for P:

300 - 0.2P = 100 + 0.8P

0.2P + 0.8P = 300 - 100

P = 250

Substituting P = 250 into the demand function, we get:

D = 300 - 0.2(250) = 250

Therefore, the equilibrium quantity of DVD players demanded domestically is 250 when the economy is closed to trade.

When the economy opens to trade, the domestic price of a DVD player will equal the world price of $100. To find the new equilibrium quantity of DVD players demanded domestically, we set D equal to the supply function and solve for Q:

300 - 0.2(100) = 100 + 0.8(100)

Q = 280

Therefore, the equilibrium quantity of DVD players demanded domestically is 280 when the economy opens to trade.

The Demand for DVD Players in a Country Is Given