Suppose the demand for good X is given by Qd = 60 -2Px + 0.01M + 7 PR

QUESTION

Suppose the demand for good X is given by Qd = 60 -2Px + 0.01M + 7 PR where Qd = quantity of X demanded; Px price of X; M = (average) consumer income; PR = price of a related good R.Assume that M = $40,000 and PR = $20. Assume that the supply function is given by Qs = -600 + Px.What are the equilibr¦
Assume that M = $40,000 and PR = $20. Assume that the supply function is given by Qs = -600 + Px. (140888) Demand function = 60-2Px + 0.01M + 7PR (Qd) Supply function= -600 + Px Now if there is equilibrium market then Quantity demanded = Quantity supplied So putting the values of M and PR in¦

demand function we get, Qd= 60 2Px + 0.01*40000 + 7*20= 600-2Px Now, Qd= Qs; or 600-2Px= -600+Px Therefore, 600+600= Px + 2Px So, 3Px= 1200 or, Px= $400 So the Price per good of X is $400

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