1Assume that the market for bread is perfectly competitive T

1)Assume that the market for bread is perfectly competitive. The demand for bread is given by the equation: D 25 P and the market supply for bread is given by: S -20 4P.

a.Determine the equilibrium price and quantity of bread.

b.What happens if the price of the bread is set at $10 per loaf?

c.What happens if the market price is set at $7 per loaf?

2) Assume that the market for bread is perfectly competitive. The demand for bread is given by the equation: D 48 P and the market supply for bread is given by: S 8P.

a.Determine the equilibrium price and quantity of bread.

b.What happens if the price of the bread is set at $10 per loaf?

c.What happens if the market price is set at $6 per loaf?

Solution

Ans.1Price- 1, 2 , 3, 4, 5, 6, 7, 8, 9, 10

Demand -25, 24, 23, 22, 21 ,20, 19, 18, 17, 16

Supply- 17, 18, 19, 20, 21, 22, 23, 24, 25, 26

According this table 1.The equilibrium price and quantity of bread is Price=$ 5 & quantity = 21

2.If the price set $ 10 per loaf The demand will decrease till 16 but the supply will be increase till 26 units.

3. if the market price is set at $ 7 per loaf The dmand will be less( 19) but supply will be high(23)

Ans2.

Price= 1 2 3 4 5 6 7 8 9 10

Demand= 48,44,40,36,32,28,24,20,16,12

Supply= 8 ,12,16, 20,24,28,32,36,40,44

According this table =

1. The equilibrium price & quantity isP= $ 6 & Q=28

2.If the price will be $ 10 = the demand will be 12 & the supply will be 44 units

3.If market price is set at $6 per loaf . in this situation demand and supply both are equal (28&28) it is equilibrium situation.