Microeconomics Exercises: Supply, Demand & Equilibrium

Exercise 1
Consider the market supply curve which passes through the intercept and from which the market equilibrium data is known, this is, the price and quantity of equilibrium PPPP=5555 and QQPP=22555555
a. Considering those two points, find the equation of the supply. (10 marks)
b. Draw a graph of this line. (10 marks)
(20 marks)
Exercise 2
Considering the previous supply line, determine if the following demand function corresponds to the market demand equilibrium stated above. QQQQ=33555555-2222
(15 marks)

Exercise 3
The production function of a firm is described by the following equation QQ=115555555500-330022 where L stands for the units of labour.
a) Draw a graph for this equation. Use the quantity produced in the y-axis, and the units of labour in the x-axis. (8 marks)
b) What is the maximum production level? (7 marks)
c) How many units of labour are needed at that point? (5 marks)

(20 marks)

Exercise 4
Solve the following system of equations:

50xx+20yy=1800

10xx+3yy=300
(10 marks)

Exercise 5
Consider the demand and supply functions for the notebooks market.

QQQQ=10000-100pp

QQQQ=900PP
a. Make a table with the corresponding supply and demand schedule. (5 marks)
b. Draw the corresponding graph. (5 marks)
c. Is it possible to find the price and quantity of equilibrium with the graph method? (5 marks)
d. Find the price and quantity of equilibrium by solving the system of equations. (5 marks)
(20 marks)

Exercise 6
Supply and demand functions show different relationship between the price and quantities supplied and demanded. Explain the reason for that relation.

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Expert Answers on Above Economics Questions

The equilibrium price is 55 and equilibrium quantity is 225000
Equation of supply is = 225000/55 = 4091
The graph is generally an upward sloping line that starts at the origin and passes through the point (55, 225000).

Demand function

Quantity demanded is 355000-2000P
Equilibrium price is 55
Qd= 355000-2000(55) = 245000
This suggests that quantity demanded is not equal to quantity supplied.

Production function

The production function is Q= 15L-0.3L2
The graph will be an inverted U shape curve whereby the output will be labelled on y-axis and labour on X axis.
Maximum production: The maximum production takes place at 187.5 units.
Labour units at maximum are 25 units of labour
System of equations: In respect to the given system of equations, the solution is x=30 and y=15
Demand is 10000-100p and supply is 900p. At price 5, Qd is 9500 and Qs is 4500 and at price 10, Qd is 9000 and Qs is 9000. The graph will download a sloping demand curve intersecting at equilibrium.

Supply & demand relationship with price

The relationship of supply is positive with the price because producers are ready to supply more at higher prices and contrary to this, demand has a negative relationship because consumers are not ready to buy at higher prices.

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