Question
P=10Q, and the inverse supply function P=2+Q. We determined the market equilibrium in the previous exercise. Comparative Statics (a) Describe (i)a new inverse demand function
P=10Q,
and the inverse supply function
P=2+Q.
We determined the market equilibrium in the previous exercise.
Comparative Statics
(a) Describe
(i)a new inverse demand function which shows an increase from the original demand,
(ii)a new inverse supply function which shows an increase from the original supply,
and find the new market equilibrium.
(b) Explain the qualitative change in the new equilibrium, i.e.,
(i)does the price move in one direction all the time, if not,write a pair of new demand and supply functions to show the movement in two opposite directions,
(ii) does the quantity move in one direction all the time, if not,write a pair of new demand and supply functions to show the movement in two opposite directions.
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