8.2 Suppose in Munich, Germany, the demand function for men’s haircuts is Qd = 720 - 40p + 0.08Y, where Qd is quantity demanded per month, p the price of a haircut, and Y the average monthly income in the city. The supply function for men’s haircuts is Qs = 150 + 20p - 10w, where Qs is the quantity supplied and w the average hourly wage of barbers.

a. If Y = ;6,000 and w = ;10, use Excel to calculate quantity demanded and quantity supplied for p = ;5, ;15, ;20, ;25, and €30. Calculate excess demand for each price. (Note that excess supply is negative excess demand.) Determine the equilibrium price and quantity. Use Excel’s charting tool to draw the demand and supply curves.

b. Assume that Y increases to €9,125 and w increases to €15. Use Excel to recalculate quantity demanded, quantity supplied, and excess demand for p = ;5, ;15, ;20, ;25, and €30.
Determine the new equilibrium price and quantity.
Use Excel to draw the new demand and supply curves. How can you explain the change in equilibrium?