Chapter 4 Class activity

ECN 101
Class Activity
Chapter 4
Prof. Ali



Chapter 4: The Market Forces of Supply and Demand


Part I

1. Suppose the demand schedule in a market can be represented by the equation
Q D=500−10 P , where Q D is the quantity demanded and P is the price. Also, suppose the
supply schedule can be represented by the equation Q s =200+10 P, where Q s is the quantity
supplied.

a. What is the equilibrium price in this market?
- 15 (P)
b. What is the equilibrium quantity in this market?
- 350
c. Suppose the price is currently equal to 10$ in this market. Is there a shortage or
surplus in this market, and how large is the shortage/surplus?
- Quantity demand is greater than quantity supply, excess demand = SHORTAGE
- Excess demand = 400-300 = 100




2. Suppose the demand schedule in a market can be represented by the equation Q D=600−20 P,
where Q D is the quantity demanded and P is the price. Also, suppose the supply schedule can be

represented by the equation Qs =100+5 P , where Q s is the quantity supplied


a. What is the equilibrium price in this market?
- 20

b. What is the equilibrium quantity in this market?
- 200

c. Suppose the price is currently equal to 18 in this market. Is there a shortage or surplus in this
market, and how large is the shortage/surplus?

SKIP

d. Suppose the supply curve shifts to Qs =300+10 P . What is the new equilibrium price and quantity

, ECN 101
Class Activity
Chapter 4
Prof. Ali

in this market?
- Equilibrium quantity = 400
- PE= 10
- Which direction should the supply curve be shifting? RIGHT (see graph)