Question:

Starting with the market demand and supply functions below, determine algebraically the new equilibrium price and quantity if (a) the demand function changes to QD’ = 12,000 – 1,000P or QD” = 8,000 – 1,000P, or (b) the market supply function changes to QS* = -4,000 + 1,000P or to QS** = 1,000P. (c) Draw a figure for parts (a) and (b) and label E’ and E”, respectively, the equilibrium point resulting when the market supply function changes to QS* or QS**; on the same figure, label F the equilibrium point resulting with QD’ and QS*, label G the equilibrium resulting with QD” and QS**, and label J the equilibrium resulting with QD” and QS*.

QD = 10,000 – 1,000P

QS = -2,000 + 1,000P