Macro Economic

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Let the quantity demand function be: QD=20-2P

Let the quantity supply function be: QS=2P

1) Solve the equilibrium price and quantity of the markets above you should show your work: (points: 2)

2) Please graph the market above (points:1)

3) What is the consumer surplus in the market assume the market is at equilibrium price (2)?

Bonus:

Tell me an appropriate joker: (1)

Sample Solution

Macro Economic

1) Equilibrium Price and Quantity

To find the equilibrium price and quantity, we need to set the quantity demanded (QD) equal to the quantity supplied (QS).

QD = QS 20 – 2P = 2P 20 = 4P P = 5

Therefore, the equilibrium price is P = 5 and the equilibrium quantity is Q = 20 – 2(5) = 10.

2) Graph of the Market

To graph the market, we can plot the quantity demanded (QD) and quantity supplied (QS) curves.

QD = 20 – 2P QS = 2P

We can substitute P = 5 into these equations to find the equilibrium points.

QD = 20 – 2(5) = 10 QS = 2(5) = 10

Therefore, the equilibrium point is (5, 10).

3) Consumer Surplus

Consumer surplus is the difference between the maximum price that a consumer is willing to pay for a good and the actual price that they pay.

In this case, the maximum price that a consumer is willing to pay for a unit of the good is $20. However, the actual price that they pay is $5. Therefore, the consumer surplus is $20 – $5 = $15.

Bonus: Joker

What do you call a fish wearing a suit?

Sofishticated.

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