Macro Economic
Sample Solution
Macro Economic1) 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.