Question

S(p) = 0 for p A demand function and a supply function for the same commodity is given. D(P) = 35 - 7 In p million units; ſo for p <7 million units; 13(1.081P) for p 27 p dollars per unit (a) Locate the shutdown point. (Round your answers to three decimal places.) (Ps, SP)) = Write a sentence of interpretation for this point. Producers are willing to supply million units at a market price of $ per unit. Below $ per unit, producers will shutdown. (b) Locate the point of market equilibrium. (Round your answers to three decimal places.) (p*, q*)-( Write a sentence of interpretation for this point. At a price of $ per unit, producers are willing to produce --Select-O m illion units, which is what consumers are willing to purchase.

Answer 1

a. Shut down point (p,sp)=(7,5.175)

Producers are willing to supply 5.175 million units at price of $7 per unit. Below $7 producers will shut down.

Reason- In the supply equation,

we can see when P=7,S(p)=0

So this is the shut down point. When p=7, S(p)= 3(1.081^7)=5.175

b. (p*,q*)=(19.853, 14.802)

At a price of $19.853, Producers are willing to produce exactly 14.802 million units which consumers are willing to purchase.

reason- At Equilibrium

35-7Inp=3(1.081^p)

p*=19.853

q*=14.802

b.