Individual Assignment @ Economy Policy

CMBA UNIMAS Page 1

Essay

1. Suppose that the demand for oranges increases. Explain the long-run effects of
the guiding function of the price in this scenario.

In the long run, the higher selling price associated with a oranges will probably signal
additional firms to be able enter into this orange market, the way it will probably sound
more profitable than other markets. Since other firms enter, supply increases, causing
the purchase price to be able to slide relative to this short-run selling price in addition to
variety to boost additionally. The higher short-run selling price provides carefully guided
additional sources into the current market.

2. For each of the following changes, show the effect on the demand curve and
state what will happen to market equilibrium price and quantity in the short run.

a. Consumers expect that the price of the good will be higher in the future.
b. The price of a substitute good rises.
c. Consumer incomes fall, and the good is normal.
d. Consumer incomes fall, and the good is inferior.
e. A medical report is published showing that this good is hazardous to your health.
f. The price of the good rises.

http://www.scribd.com/doc/3993526/Section-Exam-1-Question-1-full







Individual Assignment @ Economy Policy

CMBA UNIMAS Page 2

3. For Each of the following sets of supply and demand curves, calculate the
equilibrium price and quantity.

a. QD = 2000 2P; QS = 2P
QD = 2000 QS; QS = 1000; QD = 1000; add into the equation
QD + QS = 2000; P = 1000/2;
2Q = 2000; P = 500
Q = 1000 P = 500

b. QD = 500 P; QS = 50 + P
P = 500 QD; P = 500 275;
P = QS 50; add into the equation P = 225
QS 50 = 500 QD;
QS + QD = 550;
2Q = 550;
Q = 275; P =225

c. QD = 5000 10P; QS = 1000 + 5P
QD/10 = 500 P; QS/5 = -1000 + P; add into the equation
P= 500 QD/10; P = QS/5 + 200 ; QS = 1000 + 5P;
500 QD/10 = QS/5 + 200; 1,000 = 1000 + 5P;
QD/10 +QS/5 = 300; P = 400
QD + 2QS = 3,000;
Q = 1,000; P = 400







Individual Assignment @ Economy Policy

CMBA UNIMAS Page 3

4. Annual demand and supply for the Entronics company is given by:
QD = 5,000 + 0.5 I + 0.2 A - 100P, and QS = -5,000 + 100P
Where Q is the quantity per year, P is price, I is income per household, and A is
advertising expenditure.

a. If A = $10,000 and I = $25,000, what is the demand curve?

QD = 5,000 + 0.5(25,000) + 0.2(10,000) 100P
QD = 5,000 + 12,500 + 2,000 100P
QD = 19,500 100P

b. Given the demand curve, in part a., what is equilibrium price and quantity?
QS = 5,000 + 100P
QS = QD; 19,500 100P = 5,000 + 100P; QD = 19,500 100P
200P = 24500; QD = 19,500 100(122.5)
P = 122.5; QD = 7,250

P = 122.5; Q =7, 250

c. If consumer incomes increase to $30,000, what will be the impact on equilibrium
price and quantity?

QD = 5,000 + 0.5(30,000) + 0.2(10,000) 100P
QD = 5,000 +15,000 + 2, 000 100P;
QD = 22,000 100P

QS = QD; QD = 22,000 100P = 5,000 + 100P; QD = 22,000 100P
200P = 27,000; QD = 22,000 100(135)
P = 135; QD = 8, 500

P = 135; Q =8, 500
Individual Assignment @ Economy Policy

CMBA UNIMAS Page 4


5. A good's Demand Curve is: Qd = 50 - 2P, and its Supply Curve is: Qs = 40 + P.
a. When P = $10, what is the difference, if any, between Qd and Qs?
Qd = 50 - 2P ; Qs = 40 + P; P =10;
Qs = 40 + 10;
Qs = 50;
Qd = 50 2(10);
Qd = 30;


b. When P = $2, what is the difference, if any, between Qd and Qs?
Qd = 50 - 2P ; Qs = 40 + P; P =2;
Qs = 40 + 2;
Qs = 42;
Qd = 50 2(2);
Qd = 46;

c. What are the equilibrium values of P and Q?
Qd = 50 - 2P ; Qs = 40 + P;
50 2P = 40 + P; Qd = 50 2(3.333); Qs = 40 + 3.333;
3P = 10; Qd = 43.333, Qs = 43.333
P = 3.33,
P = 3.33, Q = 43.33

6. A product's Demand Curve is: Qd = 25 - P, and its Supply Curve is: Qs = 10 +
2P.

a. When P = $20, what is the difference, if any, between Qd and Qs?
Qd = 25 P; Qs = 10 + 2P
Qd = 25 20; Qs = 10 + 2(20);
Qd = $5 Qs = $50
Individual Assignment @ Economy Policy

CMBA UNIMAS Page 5

b. When P = $3, what is the difference, if any, between Qd and Qs?
Qd = 25 P; Qs = 10 + 2P;
Qd = 25 3; Qs = 10 + 2(3);
Qd = 22 Qs = 16

c. What are the equilibrium values of P and Q?
Qd = 25 P ; Qs = 10 + 2P;
25 P = 10 + 2P; Qs = 10 + 2(5); Qd = 25 - 5;
3P = 15; Qs = 20; Qd = 20;
P = 5
P = $5, Q = $20