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Consider the following market for printers: Qd = 90 − 3Pd Qs = 5Ps (a) Find the equilibrium P ∗ and Q∗ (b) Suppose that we want to build a more complicated model that can incorporate the market for papers. i. Do changes in paper’s prices affect the supply or demand of the printer industry? Provide a brief explanation ii. If we were to obtain an equation that incorporates paper’s price, how can we modify the supply and/or demand equation? Write an example of such an equation.

User Kcm
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Answer:

Explanation:

(a) To find the equilibrium price (P*) and quantity (Q*) in the printer market, you need to set the quantity demanded (Qd) equal to the quantity supplied (Qs) and then solve for P*:

Qd = Qs

90 - 3P* = 5P*

Now, solve for P*:

90 - 3P* = 5P*

Add 3P* to both sides:

90 = 8P*

Divide both sides by 8:

P* = 90 / 8

P* = 11.25

So, the equilibrium price (P*) in the printer market is $11.25.

Now, plug this value back into either the demand or supply equation to find the equilibrium quantity (Q*):

Qd = 90 - 3P*

Qd = 90 - 3(11.25)

Qd = 90 - 33.75

Qd = 56.25

Q* = Qd = 56.25

(b) i. Changes in paper's prices typically do not directly affect the demand for printers. Printers are a separate product from paper, and consumers generally purchase printers for reasons other than fluctuations in paper prices. Therefore, paper's prices do not significantly impact the demand for printers.

ii. If you want to incorporate paper's price into the model, you can modify the supply equation because paper's price might affect the cost of production for printers. Here's an example of how you can modify the supply equation:

Original supply equation:

Qs = 5Ps

Modified supply equation (incorporating paper's price, Pp):

Qs = 5Ps - 2Pp

In this modified equation, Pp represents the price of paper. The coefficient of 2 in front of Pp indicates how changes in paper's price affect the supply of printers. If the price of paper increases, the cost of producing printers goes up, which could lead to a decrease in the supply of printers (Qs).

User Dacav
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