Supply and Demand Problems

1) Q=2000 - 100 P, where Q is cap sales and P is price.

A. how many caps could be sold at $ 12 each?

Q = 2000-100(12)
Q = 800 caps

B. what should the price be in order the company to sell 1000 caps?
1000 =2000 - 100 P
100 P = 1000
P=$10

C. at what price would cap sales equal o zero?

Q =2000-200 P
2000-200 P =0
P = $20

2) Consider the following supply and demand curves for a certain product.
QS = 25,000P
QD = 50,000- 10,000P

a. Plot the demand supply and curve.

When QS is 0, P is 0.
When QD is 0, P is $5
 P ($)

5 S

Q
D

b. What are the equilibrium price and equilibrium quantity for the industry?
Determine the answer in algebraically and graphically.
P ($)

5 S

1.43

Q
D
 QS = QD
25,000P = 50,000- 10,000P
50,000 = 35,000 P
P = $1.43

When P = $1.43, QD = 50,000- 10,000(1.43)

QD = 35700
Thus equilibrium price is $1.43 while equilibrium quantity is 35700 units

3) QD = 65,000−¿10,000P QS = -35,000 + 15,000 P

Where Q is the quantity and P is the price of a poster, in dollar.

a. Complete the following table.
Price QS QD Surplus or shortage
$ 6.00 55,000 5000 surplus
5.00 40,000 15,000 Surplus
4.00 25,000 25,000 equilibrium
3.00 10,000 35,000 Shortage
2.00 -5000 45,000 Shortage
1.00 -20,000 55,000 shortage

b. What is the equilibrium price?

QD = QS. Thus, Price is $ 4.00

 4) The following relations describe monthly demand and supply for computer
support service catering to small business.
QD = 3,000 – 10P
QS = -1,000 + 10P
Where Q is number businesses that need services and P is the monthly fee, in
dollar.

a. At what average monthly fee would demand equal zero?

QD = 3000-10P
3000-10P = 0
10P = 3000
P=$300

b. At what average monthly fee would supply equal zero?

QS = -1000+10P
-1000+10P = 0
10P = 1000
P=$100
c. Plot the supply and demand curve.

P ($)

300 S

200

100

Q
D

d. What is the equilibrium price/output level?

QD = QS
3000 –10P = -1000+ 10P
4000 = 20P
P = $200
e. Suppose demand increase and leads to new demand curve:
QD = 3500 ̶ 10P

What is the effect on supply? What are the new equilibrium P & Q?
When demand increase, supply will increase.
QD = 3500- 10P, When QD is 0, P is $350
QS= -1500+10P, When QS is 0, P is $150
Thus, new equilibrium P & Q is $250
5) The ABC marketing consulting firm found that a particular brand of portable
stereo has the following demand curve for a certain region:
Q = 10,000 ̶ 200 P +0.03Pop +0.6 I + 0.2A
Where Q is the quantity per month, P is price ($), Pop is pollution, I is
disposable income per household (S), and A is advertising expenditure ($).

a. Determine the demand curve for the company in a market in which

P = 300 Pop = 1,000,000 I = 30,000 A = 15,000

Q = 10,000 ̶ 200 (300) +0.03 (1,000,000) +0.6 (30,000) + 0.2 (15,000)

Q = 1000

b. Calculate quantity demanded at prices of $200, $175, $150 and $125.

At $200;
Q = 10,000 ̶ 200 (200) +0.03 (1,000,000) +0.6 (30,000) + 0.2 (15,000)
Q = 21,000

At $175;
Q = 10,000 ̶ 200 (175) +0.03 (1,000,000) +0.6 (30,000) + 0.2 (15,000)
Q = 26,000

At $150;
Q = 10,000 ̶ 200 (150) +0.03 (1,000,000) +0.6 (30,000) + 0.2 (15,000)
Q = 30,000
 At $125;
Q = 10,000 ̶ 200 (125) +0.03 (1,000,000) +0.6 (30,000) + 0.2 (15,000)
Q = 36,000

c. Calculate the price necessary to sell 45,000 units.

45,000 = 10,000 ̶ 200 P +0.03 (1,000,000) +0.6 (30,000) + 0.2 (15,000)

45,000 = 61,000 ̶ 200 P
P = $80

6) Joy’s Frozen Yogurt shops have enjoyed rapid growth in northeastern. States
in recent years. From the analysis of joy’s various outlets, it was found that
the demand curve follows this pattern:

Q = 200 – 300P + 120I + 65T – 250AC + 400 Aj

Where Q = Number of cups served per week

P = average price paid for each cup
I = Per capita income in the given market (thousands)
T = Average outdoor temperature
AC = Competition’s monthly advertising expenditures (thousands)
Aj = Joy’s own monthly advertising expenditure (thousands)

One of the outlets has the following conditions: P = 1.50, I = 10, T= 60, AC
= 1.5, Aj = 10.
a. Estimate the number of cups served per week by this outlet. Also
determine the outlet’s demand curve.

Q = 200- 300 (1.50) + 120 (10) + 65(60) – 250(15) + 400 (10)

= 5100

5100 = 200 – 300(1.50) + 120 (10) + 65 (60) – 250 (15) + 400(10)

5100 = 200 – 300P + 1200 +3900 – 3750 + 400
= 200 – 300P + 1750
300P = 200 + 1750 – 5100
P = -10.5

1.5

Q
5100

b. What would be the effect of a $5,000 increase in competitor’s advertising

expenditure? Illustrate the effect on the outlet’s demand curve.

Q = 200 – 300 (1.50) + 120 (10) + 65 (60) – 250 (5015) + 400 (10)
= -1244900
 P

1.5

Q
-1244900

9) Q=1000-3000P+10A

When P=$3 and A=$2000, Q=1000-3000(3) +10(2000) =12000

When P=$2.50 and A=$2000, Q=1000-3000(2.50) +10(2000) = 13500.
Thus, it beneficial, because higher quantity demanded

When P=$4 and A=$2100

Q=1000-3000(4) +10(2100) = 10000.
Thus, it is not beneficial, because lower quantity demanded.