Consider the following demand and supply curves: Q^d = 100

Question

Consider the following demand and supply curves: Q^d = 100 - 2P, and Q^s = ½ P, calculate the equilibrium P and Q for this initial situation and assuming the supply curve changes to Q^s = ½ P + 10. Which of the following is correct? A) the initial equilibrium is P = 40, Q = 20 and the supply curve shifts left. B) the initial equilibrium is P = 40, Q = 20 and the new equilibrium is P = 36, Q = 28. C) the initial equilibrium is P = 40, Q = 20 and the new equilibrium remains the same. D) the initial equilibrium is P = 40, Q = 20 and the new equilibrium is P = 38, Q = 28.

Quizplus · Accepted Answer

First, we can find the initial equilibrium by setting Q^d equal to Q^s and solving for P and Q: 100 - 2P = ½ P P = 40 Q = 20 Now, we can find the new equilibrium with the new supply curve by setting Q^d equal to Q^s + 10 and solving for P and Q: 100 - 2P = ½ P + 10 P = 36 Q = 28 Therefore, the initial equilibrium is P = 40, Q = 20 and the new equilibrium is P = 36, Q = 28. Option B is the correct choice.

Consider the Following Demand and Supply Curves: Qd = 100