ABRERA, ZORAM F.

ACT202

1. The price equilibrium INCREASES (increases/decreases/constant) and the quantity

equilibrium INCREASES (increases/decreases/constant) when the demand curve shifts to
the write given the supply is constant.

2. The price equilibrium INCREASE (increases/decreases/constant) and the quantity

equilibrium INCREASES (increases/decreases/constant) when the increase in demand exceeds
to the increase in supply. That is, both the demand curve and the supply curve shift to the right,
but the gap between the shifts in demand is bigger than the gap between the shifts in supply.

3. The original demand equation and the new demand equation are Qdo = 120 - 10P and Qdn =
60 - 10P respectively. The original supply equation and the new supply equation are Qso = 20 +
5P and Qsn = 30 + 5P respectively. Compute the change in quantity equilibrium and the change
in price equilibrium.

Qd1 = 120 – 10P

Qd2 = Qd1 – change in demand
Qd2 = Qd1 – 60
Qd2 = 120 – 10P – 60
Qd2 = 60 – 10P

Qs1 = Qd1
20+5P=120–10P
5P+10P=120–20
15P = 100
P = 100/15
Pe1 = 6.67
Qs2 = Qd2
30+5P=60–10P
5P+10P=60–30
15P = 30
P = 30/15
Pe2 = 2

SOLVING FOR THE QUANTITY EQUILIBRIUM

USING Qd equation
Qd1 = 120 – 10P
Qe = 120 – 10 (Pe1)
Qe = 120 – 10 (6.67)
Qe = 120 – 66.7
Qe1 = 53.3 or 53 units

SOLVING FOR THE QUANTITY EQUILIBRIUM

USING Qd equation
Qd2 = 60 – 10P
Qe2 = 60 – 10 (Pe2)
Qe = 60 – 10 (2)
Qe = 60 – 20
Qe2 = 40 units

Change in price equilibrium

Pe2 – Pe1
2 – 6.67
= -4.67
 Change in quantity equilibrium

Qe2 – Qe1
40–53
= -13

7
6.67

4
Price per unit

0
10 20 30 40 50 60

Quantity demanded and supplied (unit)