In Microeconomics the demand function depends on prices (the higher the price, the lower the quantity demanded, or vice-veras (the quantity demanded varies inversely with changes in price). The opposite happens with the supply, the higher the price, the greater the quantity offered by the supplier (the quantity supplied varies in the same direction as the changes in prices). This is known in the literature as the laws of demand and supply, or demand and supply functions. This assertion refers to changes on a specific demand and supply curve. Shifts in total demand and supply can occur when incomes change or changes in prices of related goods whether substitutes (margarine versus butter) or complementary goods (automobiles and tires for these). In the case of supply and demand functions when both curves intersect, the equilibrium price and quantity demanded are determined.

The generalized functions of demand and supply for a good are shown below:

Initially M = $61,140 and PR = $6. Find the equation for the demand function

Initially PI = $25 and F = 22. Find the equation for the offer function.

1. Estimate demand and supply functions

a. Demand function ____

b. Offer function _ ___

2. Assume that in equilibrium supply and demand are equal. Estimate the price and quantity in equilibrium.

(Hint: Solve first with P and then substitute the result of P into either equation to find Q.)

The equilibrium prices and quantity are:

On________

That______

3. If a price ceiling of $600 is imposed, what will be the result, shortage or surplus?