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 demand curve changes to Q^d = 100 - P. Which of the following is correct? A) the initial equilibrium is P = 40, Q = 20 and the demand 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 is P = 66 2/3 and Q = 33 1/3. D) the initial equilibrium is P = 40, Q = 20 and the demand curve shifts right.

Quizplus · Accepted Answer

The initial equilibrium is found by setting Q^d = Q^s: 100 - 2P = ½P, solving gives P = 40, Q = 20. With the new demand curve Q^d = 100 - P, setting Q^d = Q^s gives 100 - P = ½P, solving gives P = 66 2/3, Q = 33 1/3.

Consider the Following Demand and Supply Curves: Qd = 100