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?

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?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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