Chapter 1. Figure It Out 2.3

1.1 Screen 1 of 3

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Suppose that the supply of lemonade is represented by QS = 40P, where Q is measured in pints and P is measured in cents per pint.

If the demand for lemonade is QD = 5,000 – 10P, what are the current equilibrium price and quantity?

Question

The current equilibrium price is XnZTCW+ZAQJYpsNiaq8AKgP2Df8=

The current equilibrium quantity is q+Gu/fyOwAH6XCV87I1AKQ==

The equilibrium price equates quantity demanded (5,000 – 10P) and quantity supplied (40P). A price of 100 cents results in a quantity demanded of 4,000 pints; that price also results in a quantity supplied of 4,000 units. For further review, see section “Market Equilibrium”.

1.2 Screen 2 of 3

Question

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1.3 Screen 3 of 3

After the frost, the demand for lemonade is QD = 5,000 – 10P, and the supply of lemonade is QS2 = 40P – 400. What will be the equilibrium price and quantity of lemonade?

Question

The equilibrium price will be 1MR9SwAQZao=

The equilibrium quantity will be FWVeWbhJTM8NvPDG5sGKYA==

The equilibrium price equates quantity demanded (5,000 – 10P) with the new quantity supplied (40P - 400). A price of 108 cents results in a quantity demanded of 3,920 pints; that price also results in a quantity supplied of 3,920 units. So, comparing these numbers with the original price and quantity, the decrease in supply causes the equilibrium price to increase and the equilibrium quantity to decrease. For further review, see section “Market Equilibrium”.