Suppose the market for potatoes can be expressed as follows: Supply: Q

Suppose the market for potatoes can be expressed as follows: Supply: QS = -20 + 10p Demand: QD = 400 – 20p Suppose the government restricts the quantity to 100 units. What will be the price of potatoes?

What will be an ideal response?

 

ANSWER

(1 ) Find the inverse supply curve: p = 2 + .1Q. If quantity were restricted to 100 units, sellers would require only $12 per unit. (2 ) Find the inverse demand curve: p = 20 – .05Q. Buyers would be willing to pay $15 per unit and would bid the price up to that amount.

 

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