Question

The following functions representing demand and supply for new trucks are given by Q=40-0.2P, and P=20+Q

a.) Calculate the equilibrium price and quantity in the market for new trucks.

b.) Show graphically the S, D & (P*, Q*) for the market for new trucks, given the data given above. Show the intercepts and slopes. Label the axes.

c.) Show in the graph above the Qd and Qs compare at a price level P1, above P*. Is there a surplus or a shortage at P1? How is the respective surplus/ shortage resolved?

Answer 1