Econ Problem-Please Help?

. Consider the market for DVDs. Suppose both supply and demand are linear and given by the equations:
Demand for DVDs in thousands is Dx(P) = 380/3 – (20/3)•P for P ≤ 19.
Supply of DVDs in thousands is Sx(P) = 10 +5•P for P  2.
A) At a price of P = $6, how many units are demanded, how many are supplied, and what happens to inventory levels? What would you expect to happen over time to price in this market?

Answer:
Just plug in P for each equation.

Dx(P)=380/3 - (20/3) *6

Dx(P) = 172/3 or 86 2/3

Sx(P) = 10+5*6
Sx(P) = 40

For this price P at $6 there is roughly 86 demanded for and 40 supplied. So there is more demand than is actually supplied so there is shortage.

Over time I believe the price would go up in order to reach a level where the supply will equal the demand. A higher price will cause supplier to want to produce more and will cause buyers to lower the amount they demand.

Haha. . . right.

I barely passed my own econ class -- and my instructor had to practically hold my hand for me to do that much.

The answers post by the user, for information only, FunQA.com does not guarantee the right.

FunQA.com

Econ Problem-Please Help?

Topic