answer : The equilibrium price and quantity after the 120 units increase in supply are $10 and 200 units respectively.
explanation:
The market equilibrium occurs at the point E, that is, at the intersecting point of two curves. The equilibrium quantity is 140 units, and the equilibrium price is $12.
(b) If the price is $16, the quantity supplied is 250 units, but the demand by the consumers is 45 units. The economy will have surplus of goods.
The surplus amounts to = Supply - Demand = 250 - 45 = 205 units.
The market can adjust the surplus by decreasing the number of DVDs produced.
(c) If the price is $8, the quantity demand is 300 units, and the supply is of 40 units. Thus, there will be a shortage in the economy.
Shortage = Demand - Supply = 300 - 40 = 260 units.
To overcome the shortage, the price level of DVDs must increase.
(d) The new quantity supply of DVDs after a decline in the cost of production is: