To compute quantity demanded
and supplied at a given price
To obtain excess demand or
excess supply in a market
To compute the equilibrium
price
II. Data
The demand and supply curves
for a good are:
Demand: Q =
5000 - 25P,
Supply: Q = 5P
- 100,
where P
is price and Q
is quantity.
For any value of price (P),
obtain the corresponding quantity demanded and quantity
supplied.
Next,
determine the excess demand or excess supply in the market.
Select a value for Price
and click on Gimme Excess
Supply! to verify your
calculations.
III. Questions
Using the equations above, sketch
the demand and supply
curves. Indicate the intercepts and slope of each.
If the price falls to, or
below, $ _____, firms will not supply
any quantity to the market.
If the market price is at,
or above, $ _____, consumers will not buy quantity of the good.
Suppose the current market
price is $150. At this price the market experiences a [ surplus
/ shortage
] which will be eliminated if the market price [ rises
/ falls
]. Explain.
The equilibrium price in the
market is $ _____; the equilibrium quantity is ______. Indicate the
values on the graph.
If the govt imposes a price
floor of $180, it will result in a [ shortage
/ surplus
] of ______ units of the good. Indicate the effect of the price floor
on the graph.
IV. Additional questions
The market for widgets is
described by the following:
Demand: P = 24 - 2Q,
Supply: P = 3 + Q,
where P
represents the price of a widget and Q
the quantity of widgets.
Sketch the demand and
supply curves for widgets.
Obtain the equilibrium
values of price and quantity, and indicate them on the graph.
The govt. imposes a
price floor of $20, i.e. the market price of a widget cannot be less
than
$20. On a graph below, indicate the quantity of widgets that will be
bought and sold in the market.
Compute the value of
excess
supply (or excess demand) of widgets at a price floor of $20.
If the govt. were to
remove the price floor, the price of widgets will [ rise
/ fall
] immediately. Explain.
The govt. raises the hourly
minimum wage to $10.00. Noting
the current conditions in the labor
market, explain how the increase in the minimum wage will affect the
level of employment. (Sketch also required.)