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Calculate the market demand function.
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2 partsStep-by-step solution
9 stepsPart a· 2 steps
Determine the market demand and supply functions for fairly used Mercedes cars.
Calculate the market demand function.
The individual demand function is , and there are 75 buyers.
Calculate the market supply function.
The individual supply function is , and there are 10 sellers.
The market demand function is and the market supply function is .
Part b· 2 steps
Complete the market demand and supply schedule of fairly used Mercedes cars below.
Calculate Quantity Demanded () and Quantity Supplied () for each price using the functions from part (a).
- For : units units
- For : units units
- For : units units
- For : units units
Complete the schedule.
Price (FCFA) 5 10 15 20 Quantity demanded(units) 3150 2400 1650 900 Quantity supplied(units) 650 1150 1650 2150
Part c(i)
The equilibrium price
Using the market demand and supply functions obtained in a) above, determine
Part c(ii)
The equilibrium quantity
Set market demand equal to market supply to find the equilibrium price.
The equilibrium price is .
Substitute the equilibrium price into either the market demand or market supply function to find the equilibrium quantity.
Using :
The equilibrium quantity is .
Part d· 3 steps
If the government fixes a minimum price of 20 FCFA for these cars, how much will it cost her to maintain the Price?
Calculate the quantity demanded and quantity supplied at the minimum price of 20 FCFA.
At FCFA:
units
unitsDetermine the surplus quantity.
Surplus = units.
Calculate the cost to the government to maintain the price.
Cost = Surplus quantity Minimum price
Cost =
The cost to
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