Khailyn Mae D.

Ravanzo C004- MAMW100 (TTH 10:30-12:00)

Find/ Determine/ Explain what is required.

1. The following demand and supply functions for a DRUG A (which is a medicine for
Hypertension) are:
DEMAND FUNCTION………………. P=80-1.5Q
SUPPLY FUNCTION…………………. P=36+1.25Q

A. At what P and Q will supply and demand for Drug A be at equilibrium? (10 points)
Qd= Qs Pd=Ps SUBSTITUTE:

P = 80 – 1.5 (16) = 36+ 1.25 (16)

80-105Q = 36+1.25Q P= 80-24 =36+ 20

44 = 2.75 Q P= 56=56
Q= 16
44 = 2.75 Q
2.75 2.75
The DRUG A, medicine for hypertension, is at equilibrium price and quantity when there
is a demand of 16 units or pieces, valued at 56 pesos each. Such answers were derived
using the demand and supply function. First, we equate the demand and supply
function, then perform the mathematical operations, and got the quantity of demand.
With that, we substitute 16 (quantity demanded) to both supply and demand function to
determine the price. Hence, there is a market equilibrium when the seller/ supplier can
produce 16 units by which the consumers are willing to buy at the price of 56 pesos.

B. What is the total revenue at market equilibrium? (10 points)

Quantity x Price per unit= TOTAL REVENUE Using the values derived from
letter as, we simply multiply it to each
Quantity= 16 other to get the total revenue. Meaning,
Price= 56 when the supplier/ seller has 16 units or
products, and the consumer is willing to
16 x 56 = 896 buy it at 56 pesos per unit, then the
supplier/ seller will generate a total
revenue of Php 896.
 2. ABC Company is a meat processing company. With Christmas just around the
corner, the company is in full swing processing Christmas Ham. The demand function
for Christmas’ Ham is given by the equation,
Qd = 150 – 1.25 P
A. If the company wishes to sell a total of 80 pieces of ham, how much should be the
Price per piece of ham? (10 points)

QD = 150-1.25P If the company wishes to produce 80 pieces

of ham, using the demand function and
80 = 150- 1.25 P
substituting the given quantity of 80, then
1.25P = 150-80 the price per piece of ham should be Php
56.
1.25P= 70
1.25P = 70
1.25 1.25
P= 56

b. Plot the demand function using P as your vertical axis and give your “insight” on the
direction of the line (20 points).

P The demand curve is a graphical

representation of the price of a good or
80 service and the quantity demanded.
60 With that being said, the graph shows the
40 relationship between the price of the ham
and the demand of the said product. Mainly,
20 it shows that a downward slope, from left to
right which means that there is an INVERSE
0 Qd RELATIONSHIP between the price and
20 40 60 80 demand. As the price (Vertical axis)
increase, the demand (horizontal axis) of
the product decreases.
And that as well is in connection with the
law of demand.
3. The demand and supply function for LECHON during Christmas season is
Pd= 8000-400Qd and Ps= 2000+400Qs respectively.

a. Calculate the equilibrium price and quantity. (20 points)

Pd= 8000-400Qd Ps= 2000+400Qs SUBSTITUTE:
Ps= 8000+400Qd= 2000+400Qd Ps= 8000-400 (7.5)
= 8000-2000= 400Qd+400Qd Ps= 8000- 3000
= 6000 = 800Qd Ps= 5000
800 = 800
Qd= 7.5

b. If the government provide a subsidy of 400 per Lechon,

b.1 Rewrite the supply function to include the subsidy
Supply function: Ps= 2000+400Qd
Supply function with subsidy: Pd+S = Ps
New Supply Function: Ps= 1600+400Qs

b.2 Calculate the new equilibrium price and quantity. (10 points)

8000-400Qd+400= 2000+400Qd SUBSTITUTE:

8000+400-2000=400Qd+400Qd Ps= 1600+400Qs
Ps= 1600+400(8)
6400 = 800Qd P= 4800
800 800
Qd= 8
b.3 What observations did you have when government gave this subsidy to
consumers (relative to the demand and supply). (10 points)

Comparing the results of the equilibrium price and quantity of with and
without subsidy, I have observed that when the government gives a 400 subsidy,
it resulted to both higher quantity and lower price.
From what I know, subsidy increases the overall supply as it entices the
supplier to create/ produce more products, in which it also increases the overall
quantity demanded (of Lechon) and lowers the price of such product. The first
equilibrium quantity and price were 7.5 and 5,000 respectively. As for the
equilibrium price and quantity when the subsidy was added, it resulted to 8 and
4,800 respectively. Obviously, the quantity increased, and the price decreased
when the subsidy was given/ added.