Suppose the demand for the product in question increases whi

Suppose the demand for the product in question increases, which leads to a new demand equation given below (i.e. an upward shift in demand)

                              Q_{d =} = 35,000 - 100P

     Find new market clearing price and quantity using new demand equation given above and the old supply equation. Show the result in the same graph with the market clearing price and quantity you obtained in question (b).

s. Compare the new market clearing price and quantity to the one in (b) and discuss how does market eliminate the resulting disequilibrium (surplus or shortage). Also explain how sellers (or producers) would make a short run adjustment in quantity so that new market clearing is achieved. Use short run rationing function of price again in its adjustment process.

t. Below is the new (increased) supply equation (i.e. a shift in supply). Find new market clearing price and quantity using the new supply equation below and the new demand equation in (r).

                               Q_S = -5,000 + 100P

Compare the new market clearing price and quantity above to that in (r) and discuss disequilibrium adjustment process in terms of long run adjustment by sellers (or producers). Incorporate long run rationing function of price.

u. Discuss the difference in the role of price played in taking care of shortage/surplus in short run in (r) v. scarcity/abundance in long run in (t).

     v. Briefly explain how Wal-Mart created an upward shift in demand as in (r) by building its first Wal-Mart in a small town, Bentonville, AR, and then how did they engineer shifts (increase) in supply in (t). If you do not address the essence of what made Wal-Mart the world largest retailer in your answer, you may not get credit even though what you said might not be wrong.

Suppose the demand for the product in question increases, which leads to a new demand equation given below (i.e. an upward shift in demand)

                              Q_{d =} = 35,000 - 100P

     Find new market clearing price and quantity using new demand equation given above and the old supply equation. Show the result in the same graph with the market clearing price and quantity you obtained in question (b).

s. Compare the new market clearing price and quantity to the one in (b) and discuss how does market eliminate the resulting disequilibrium (surplus or shortage). Also explain how sellers (or producers) would make a short run adjustment in quantity so that new market clearing is achieved. Use short run rationing function of price again in its adjustment process.

t. Below is the new (increased) supply equation (i.e. a shift in supply). Find new market clearing price and quantity using the new supply equation below and the new demand equation in (r).

                               Q_S = -5,000 + 100P

Compare the new market clearing price and quantity above to that in (r) and discuss disequilibrium adjustment process in terms of long run adjustment by sellers (or producers). Incorporate long run rationing function of price.

u. Discuss the difference in the role of price played in taking care of shortage/surplus in short run in (r) v. scarcity/abundance in long run in (t).

     v. Briefly explain how Wal-Mart created an upward shift in demand as in (r) by building its first Wal-Mart in a small town, Bentonville, AR, and then how did they engineer shifts (increase) in supply in (t). If you do not address the essence of what made Wal-Mart the world largest retailer in your answer, you may not get credit even though what you said might not be wrong.

Solution

At equilibrium,

Q_D = Q_s

35000 - 100 P = - 5000 + 100 P

40000 = 200 P

P = 200

Equilibrium quantity = 35000 - 100 P

   = 35000 - 100 * 200

= 15000 Units (demand side)

   OR

Equlibrium Quantity = - 5000 + 100 P

= -5000 + 100 * 200

= - 5000 + 20000

= 15000 Units (Supply side)

Conclusion:- Equlibrium price = $ 200 and Equilibrium quantity = 15000 Units