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Qd 2=5+ 2 P12 P2
Qs 1=3+2 P1
Qs 2=2+3 P2
P
di
si
where , i ,
and
denote the price, the quantity demanded and the quantity
supplied of good i respectively. Determine the equilibrium price and quantity for this
two-commodity model. Are these two goods substitutes or complements?
4. The daily supply and demand for 1kg boxes of beef at the superstores in Nottingham
city can be expressed by the following equations (where P is the price in pound per box
Qd
Qs
and
and
are the demanded and supplied quantities in 1,000 boxes):
Qs=2+2 P
(Supply)
Qd =161.6 P
(Demand)
(b) The government decides to impose a subsidy to the beef by giving 20% of the price
per box. Define the new supply function and calculate the new equilibrium quantity
Q and price
P .
(c) Sketch the Demand function and both Supply functions (with P on the vertical axis)
stating the slopes and the values where these functions cross the vertical axis. On the
same graph, using the answers in (a) and (b), label the equilibrium values for Q , P
,
Q and
P .