ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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The market supply curve for a certain product is given by the following
formula: Ps(Qg)=10+5 Qg. The demand curve is given by PDQD)=190-10QD.
a) What are the equilibrium price and quantity in the competitive equilibrium?
b) Draw a diagram that shows the market supply and demand curve as well as
the equilibrium price and quantity.
Assume that the willingness-to-pay for the product drastically increases for most of the
customers: The new demand curve is perfectly inelastic (i.e., the price elasticity of
demand is zero). Assume that the new equilibrium price is still at 70.
c) Draw the new demand curve in your diagram from b). Briefly explain, why you
drew it that way?
d) What is the new equilibrium demand?
e) Are the producers better off after the increase in the willingness-to-pay for the
product?
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Transcribed Image Text:The market supply curve for a certain product is given by the following formula: Ps(Qg)=10+5 Qg. The demand curve is given by PDQD)=190-10QD. a) What are the equilibrium price and quantity in the competitive equilibrium? b) Draw a diagram that shows the market supply and demand curve as well as the equilibrium price and quantity. Assume that the willingness-to-pay for the product drastically increases for most of the customers: The new demand curve is perfectly inelastic (i.e., the price elasticity of demand is zero). Assume that the new equilibrium price is still at 70. c) Draw the new demand curve in your diagram from b). Briefly explain, why you drew it that way? d) What is the new equilibrium demand? e) Are the producers better off after the increase in the willingness-to-pay for the product?
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