APPENDIX: ALGEBRAIC REPRESENTATION OF
SUPPLY, DEMAND, AND EQUILIBRIUM
1. a. The tables are shown below:
Price
(Dollars
per
gallon)
Quantity
Demanded
(Gallons
per year)
Quantity
supplied
(Gallons
per year
0 600 -150
1 500 0
b. See the accompanying graph. Equilibrium price is 3 and equilibrium quantity is
2. a. The following are the demand and supply tables after the hormone is introduced:
The hormone (a technological advance) shifts the supply curve to
the right by 125,000 gallons, The demand curve is unchanged.
b. The original supply curve is S0. The growth hormone shifts the supply curve to S1
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© 2017 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Price
(dollars per
gallon)
Quantity
Demanded
(gallons per
year)
Quantity
Supplied
(gallons
per
year)
0.00 600 -25
1.00 500 125
c. The demand curve remains the same at QD = 600 – 100P. The supply curve
becomes QS = -25 + 150P. To solve the two equations, set them equal to one
d. Quantity supplied would be 425 (-25 + 150 × 3) and quantity demanded would be
3. a. The demand curve is QD = 10 – P; the supply curve is QS = 2P – 5. To solve for
b. The new demand curve is QD = 13-P. To solve for equilibrium price and quantity,
c. The new supply curve is QS = 2P-8. To solve for equilibrium price and quantity,
4. a. A demand curve follows the formula QD = a – bP, where a is the quantity-axis
b. A supply curve follows the formula, QS = a + bP, where a is the quantity-axis
c. A movement in supply or demand is reflected in the effect of a change in P on
5. a. P = 4; Q = 6
b. Since the government set price is above the equilibrium price, it is a price floor.
6. a. The new supply equation is QS = -150 + 150(P – 1) where P is the equilibrium
b. P = 3.60; Q = 240.
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© 2017 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
7. a. The new demand equation is QD = 600 -100(P + 1) where P is the price suppliers
b. P = 3.60; Q = 240.
c. Farmers receive $2.60 per gallon. It doesn’t matter who pays the tax, the market
8. a. The new supply equation is QS = -150 + 150(P + 1) where P is the equilibrium
b. P = 2.40; Q = 360.
c. Farmers receive $3.40 per gallon.
9. Equilibrium price is $2.
a. P = $3.00 is above equilibrium price, so it is a price floor. There is a surplus of 8.
b. P = $1.50 is below equilibrium price, so it is a price ceiling. There is a shortage of
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© 2017 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.