Clicker Check Question: Have
you taken a calculus course?
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1. Never.
2. In high school but not
college.
3. I am taking my first
calculus course this term.
4. I have completed a
college calculus course.
The demand curve is given by
P=100-Q and the supply curve by
P=20+4Q. The competitive
equilibrium Quantity is
1.
2.
3.
4.
5.
Q=80
Q=44
Q=28
Q=20
Q=16
Solving for Equilibrium Quantity
• Demand Curve P=100-Q
• Supply Curve P=20+4Q
• Two equations in two unknowns.
• Supply curve crosses demand curve where
100-Q=20+4Q.
This happens where 80=5Q or Q=16
The demand curve is given by
P=100-Q and the supply curve by
P=20+4Q. The competitive
equilibrium Price is
1.
2.
3.
4.
5.
P=84
P=80
P=64
P=24
P=20
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Solve for Equilibrium Price
• We found that Q=16.
• We know from demand equation that
P=100-Q.
• So P=84
And on to our main lecture…
The price of a good rises and so
does the quantity sold. These
observations are consistent with:
1. An upward shift of the
supply curve.
2. A downward shift of
the supply curve.
3. An upward shift of the
demand curve.
4. A downward shift of
the demand curve.
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Price
With upward sloping supply, if
Demand Curve shifts up,
Price and Quantity both rise.
Demand curve shifts up
New Equilibrium
Old
Equilibrium
Quantity
If the supply curve shifts
upwards, we expect
r i.
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Pr
ic
1. Price and quantity both
rise.
2. Price rises, quantity
falls.
3. Price and quantity both
fall.
4. Price falls, quantity
rises.
Here is the picture.
Price
Supply curve shifts up.
New equilibrium
Old equilibrium
Quantity
And now back to our lecture…