Key Answer - Homework (2)

Case (1): A:

P Qd Qs
0.5 90 30
1 80 50
1.5 70 70
2 60 90
2.5 50 110

B: at equilibrium:
Equilibrium price= 1.5 Quantity equilibrium= 70
C: when P=1$ there will be Shortage (Qd > Qs)
In this case, the price mechanism throughout the auction or non-price rationing will work till the
market is clear.
D: when the price of substitute good increase then the demand of this good will increase (shift to
the right).
The new equilibrium= E1
Quantity equilibrium will increase
Equilibrium price will increase

1
Case (1): A:

P Qd Qs
1 14 9
2 12 12
3 10 15

B: at equilibrium:
Equilibrium price= 2 Quantity equilibrium= 12
C: when P=3$ there will be surplus (Qs > Qd)
In this case, the price mechanism throughout the discounts will work till the market is clear.
D: when the price of production goods increases then the supply of this good will decrease (shift
to the left).
The new equilibrium= E1
Quantity equilibrium will decrease
Equilibrium price will increase