Question 2Impact of price reduction on revenue

A hardware store in a regional city is well known for its range of gardening tools and building supplies - particularly timber.One year, there is an over-supply of timber, which means that the hardware store must reduce the price of its timber to clear excess stock.For a limited time, the hardware store manager decides to have a timber sale, during which GST of 10% does not apply.

Your task is to determine the consequences of the short-term removal of 10% GST.

The supply and demand equations are given by Demand Equation: = 175 15

Supply Equation: = 0.077²+ 5.5 + 66

whereqis the mass of timber (in hundreds of kilograms) ;pis the price of timber in dollars.aandbarecoefficients to be chosen below.

Steps to complete to undertake the investigation

1.Obtain two random numbers for a and b between 0.1 and 0.9 inclusive. Use the Excel random function =Rand() or the RANDOM key on your calculator.

2.Find the equilibrium price and quantity algebraically,withoutthe price decrease.

3.Update the supply equation to include the removal of 10% GST.

4.Use algebra to find the new equilibrium price and quantity.

5.Use Excel to graph on the same set of axes, the original supply and demand equations (from part 1) and the updatedsupplyequation with the proposed price decrease(part 3).