Download Q: the following relations describe monthly demand

Q: the following relations describe monthly demand and supply for a computer support
service catering to small businesses:
Qd=3,000 -(minus)10 P
Qs=1,000+ 10P
where Q is the number of businesses that need services and P is the monthly fee, in
dollars.
a) At what average monthly fee would demand equal zero?
$300
b)at what average monthly fee would supply equal zero?
Qs = 1,000 + 10p
0 = 1,000 + 10p
10p = -1,000
p = -$100
Supply would never equal 0
c)Plot the supply and demand curves.
Please see the attached excel sheet
Supply & Demand
8,000
4,000
Quantity Demanded
Quantity Supplied
2,000
0
$0
(2,000)
$5
0
$1
00
$1
50
$2
00
$2
50
$3
00
$3
50
$4
00
$4
50
$5
00
Quantity
6,000
(4,000)
Price
d)What is the equilibrium price/output level?
Price = $100
Quantity = 2,000
e)suppose demand increases and leads to a new demand curve:
Qd=3,500 -(minus)10P
what is the effect on supply? What are the new equilibrium P and Q?
No effect on Supply.
Qd = 3,500 – 10p
Qs = 1,000 + 10p
At Equilibrium:
3,500 – 10p = 1,000 + 10p
2,500 = 20p
P = $125
Qd = 3,500 – 10(125)
= 3,500 – 1,250
= 2,250
New Equilibrium Price = $125
New Equilibrium Quantity = 2,250
f)Suppose new suppliers enter the market due to the increase in demand so the new
supply curve is Q= -(minus)500 + 10P. What are the new equilibrium price and
equilibrium quantity?
Qs = -500 + 10p
QD = 3,500 – 10p
-500 + 10p = 3,500 -10p
4,000 = 20p
P = $200
Q = -500 + 10($200)
= -500 + 2,000
= 1,500
G) Show these changes on the graph.
Supply & Demand
4,000
Quantity Demanded
Quantity Supplied
QD (2)
QS (2)
2,000
1,000
(1,000)
$2
5
$5
0
$7
5
$1
00
$1
25
$1
50
$1
75
$2
00
$2
25
$2
50
0
$0
Quantity
3,000
Price