QUANTITATIVE ECONOMICS

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EQUILIBRIUM PRICE AND QUANTITY You need to be able to: Calculate the equilibrium price and equilibrium quantity from linear demand and supply functions. Plot demand and supply curves from linear functions, and identify the equilibrium price and equilibrium quantity. State the quantity of excess demand or excess supply in the above diagrams. Calculating Equilibrium Price and Quantity In order to do this, we need to find where Q D = Q S . The steps are as follows: 1. Take the two functions that you are given and substitute Q D and Q S from them into an equilibrium equation. E.g. Q D = 200 – 4P and Q S = 4P So: 200 – 4P = 4P 2. Solve the equation for P and this gives the equilibrium price. E.g. 200 – 4P = 4P 200 = 8P 200 = P 8 25 = P 3. Substitute P into either of the demand or supply functions and solve for Q. E.g. Q D = 200 – 4P Q D = 200 – (4 x 25) Q D = 200 – 100 Q D = 100 4. You can check this by solving for Q in the function that you did not use the first time. E.g. Q S = 4P Q S = 4 x 25 Q S = 100 Now you have a go! Question 1.3 In the market for toothpaste, the demand function is Q D = 2000 – 200P and the supply function is Q S = -400 + 400P, where price is given in $ per tube of toothpaste and quantity is given in thousands of tubes of toothpaste per month. Calculate the equilibrium price and quantity. Question 1.4 In the market for chocolate bars, the demand function is Q D = 900 – 100P and the supply function is Q S = 200P, where price is given in $ per chocolate bar and quantity is given in thousands of chocolate bars per month. Calculate the equilibrium price and quantity. Produced by Ian Dorton & Jocelyn Blink Page 8
Question 1.5 On the graphs below, plot the curves for questions 1.3 and 1.4 above and identify the equilibrium prices and quantities. Fully label the diagrams. Produced by Ian Dorton & Jocelyn Blink Page 9
Page 1 and 2: IB HIGHER LEVEL ECONOMICS QUANTITAT
Page 3 and 4: Topic 1 - Linear Demand and Supply
Page 5 and 6: Have you fully labelled the axes Ex
Page 7: Now you have a go! Question 1.2 On
Page 11 and 12: Topic 2 - Elasticities Price Elasti
Page 13 and 14: Cross Elasticity of Demand (XED) Yo
Page 15 and 16: You need to be able to: Price Elast
Page 17 and 18: Q S = - 400 + 400(P - 0.75) Q S = -
Page 19 and 20: ii. iii. Calculate the new supply f
Page 21 and 22: Question 3.2 In the market for choc
Page 23 and 24: Q S = - 400 + (400xP) + (400 x 0.75
Page 25 and 26: ii. iii. Calculate the new supply f
Page 27 and 28: Now you have a go! Question 3.4 In
Page 29 and 30: The quantity demanded is now 1,400
Page 31 and 32: PRICE FLOORS Calculate possible eff
Page 33 and 34: Topic 5 - Calculating costs, revenu
Page 35 and 36: In the table above, the TFC of prod
Page 37 and 38: In the table above, the total reven
Page 39 and 40: Question 5.7 From the above diagram
Page 41 and 42: In the diagram below, MR is at zero
Page 43 and 44: Now you have a go!! Question 11.1 U
Page 45 and 46: Step 2 Identify the country with th
Page 47 and 48: Topic 13 - Tariffs, quotas, and sub
Page 49 and 50: 7. Calculate the fall in consumer s
Page 51 and 52: 2. Identify the level of domestic p
Page 53 and 54: Question 13.2 In the market for bot
Page 55 and 56: Topic 14 - Exchange rates You need
Page 57 and 58: Calculating the price of a good in
Page 59 and 60:
Balance of Trade in services will b
Page 61:
Topic 16 - Terms of Trade You need
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QUANTITATIVE ECONOMICS

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