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CH3 : Numerical Examples

CH3 : Numerical Examples. Q1: If QD = 800 – 2P QS = 200 + 1P Calculate equilibrium price (p*) and equilibrium quantity (Q*) !! Answer : . . . At Price Equilibrium QD = QS

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CH3 : Numerical Examples

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  1. CH3 : Numerical Examples

  2. Q1: If QD = 800 – 2P QS = 200 + 1P Calculate equilibrium price (p*) and equilibrium quantity (Q*) !! • Answer : . .. At Price Equilibrium QD = QS . ..800 – 2P = 200 + 1P 800 – 200 = 2P* + 1 P* 600 = 3 P* . .. 200 = P* . .. Q* = QD = 800 – 2P* . .. Q* = 800 – 2(200) Q* = 400 unit or Q* = Qs = 200+ 1 (200) =400 unit

  3. Q2: If QD = 300 – 3P QS = 100 + 2P Calculate equilibrium price (p*) and equilibrium quantity (Q*) !! • Answer : . .. At Price Equilibrium QD = QS . ..300 – 3P = 100+ 2P 300 – 100 = 3P* + 2 P* 200 = 5 P* . .. 40 = P* . .. Q* = QD = 300 –3P* . .. Q* = 300 – 3(40) Q* = 180 unit or Q* = Qs = 100+ 2 (40) =180 unit

  4. Q3: If QD = 600– 4P QS = 100 + 1P Calculate equilibrium price (p*) and equilibrium quantity (Q*) !! • Answer : . .. At Price Equilibrium QD = QS . ..600 – 4P = 100 + 1P 600 – 100 = 4P* + 1 P* 500 = 5 P* . .. 100 = P* . .. Q* = QD = 600 – 4P* . .. Q* = 600 – 4(100) Q* = 200 unit or Q* = Qs = 100+ 1 (100) =200 unit

  5. Q4: Assume the following market model: QD1990 = 1600 – 125P QD1991 = 1200 – 125P QD1992 = 1800 – 125P QS1990-1992 = 440 + 165P Calculate equilibrium prices (p*) and equilibrium quantities (Q*) in 1990, 1991 and 1992 !! • Answer : In 1990 . .. At Price Equilibrium QD1990 = QS1990 . ..1600 – 125P = 440 + 165P 1600 – 440 = 165P* + 125 P* 1160 = 290 P* . .. 4 = P* . .. Q* = QD = 1600 – 125P* . .. Q* = 1600 – 125(4) Q* = 1100 unit or Q* = Qs = 440 + 165(4) =1100 unit

  6. In 1991 . .. At Price Equilibrium QD 1991 = QS1991 . ..1200 – 125P = 440 + 165P 1200 – 440 = 165P* + 125 P* 760 = 290 P* . .. 2.62 = P* . .. Q* = QD = 1200 – 125P* . .. Q* = 1200 – 125(2.62) Q* = 872 or Q* = Qs = 440 + 165(2.62) =872

  7. In 1992 . .. At Price Equilibrium QD1992 = QS1992 . ..1800 – 125P = 440 + 165P 1800 – 440 = 165P* + 125 P* 1360 = 290 P* . .. 4.69 = P* . .. Q* = QD = 1800 – 125P* . .. Q* = 1800 – 125(4.69) Q* = 1213.8 or Q* = Qs = 440 + 165(4.69) =1213.8

  8. Demand function : • P = a – b QD • P = price of the good • a = tell us the price at which no one willing to buy the good = ∑P - ∑ QD (b) ”The intercept” n n • - = means that there is negative relationship between QD &P • b = show us when QD increases by 1 unit , P ’ll decreases by how much = P2-P1 / QD2-QD1 ”The slope” • QD = Quntity demanded

  9. Calculate a &b and comment on your results: • b = p2-p1 / QD2-QD1 =2 – 1 / 5-8 = -0.33 Comment :When QD increases by 1 unit , P ’ll decreases by 0.3 • a = ∑P - < ∑ QD (b) > n n = (1+2) - < (8+5) (-.033)> = 3.6 2 2 Comment :if p = 3.6 , QD ’ll = zero . .. P = a – b QD . .. P = 3.6 – 0.33 QD

  10. Calculate a &b and comment on your results: • b = p2-p1 / QD2-QD1 =5 – 2 / 8-10 = -1.5 Comment :When QD increases by 1 unit , P ’ll decreases by 1.5 • a = ∑P - < ∑ QD (b) > n n = (2+5+8) - < (10+8+6) (-1.5)> = 17 3 3 Comment :if p = 17 , QD ’ll = zero . .. P = a – b QD . .. P = 17 – 1.5 QD

  11. Supply function : • p = a + b Qs • P = price of the good • a = tell us the price at which no one willing to supply the good= = ∑p - < ∑ Qs (b) >”The intercept” n n • + = means that there is possitive relationship between Qd &P • b = tell us when Qs increases by 1 unit , P ’ll increases by how much ”The slope” • = p2-p1 / QS2-QS1 • Qs = Quntity supplied

  12. Calculate a &b and comment on your results: • b = p2-p1 / Qs2-Qs1 =2 – 1 / 6-3 = .33 Comment :When QS increases by 1 unit , P ’ll increases by 3 units • a = ∑p - ∑ QS (b) n n = (1+2) - < (6+3) (.33) > = 0.015 2 2 Comment :if p = 0.015 , QS ’ll = 0 . . .. P = a + b Qs . .. P = 0.015 + .33 QD

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