Question

Worldwide quarterly sales of Nokia cell phones was approximately q=-p+156 million phones when the wholesale price was $p. (8 points)

(1) If Nokia was prepared to supply q=4p-394 million phones per quarter at a whole price of $p, what would be the equilibrium price?
(2)The actual wholesale price was $105 in the fourth quarter of 2004. Estimate the projected shortage or surplus at that price.

Answer 1

Answer: (1) p = $110

(2) shotage of 25 milion phones

Explanation:

(1) For the equilibrium, q supply = q sales

sales: q=-p+156

supply: q=4p-394

4p-394 = -p+156

4p + p = 156 + 394

5p = 550

p = 110

(2) p = 105

sales: q=-p+156

q = -105 + 156

q = 51

supply: q=4p-394

q = 4.105 - 394

q = 420 - 394

q = 26

As sales > supply, is is a shortage of 51 - 26 = 25 milion phones