Assume That the Equation for Demand for Bread at a Small

question 6

Essay

Assume that the equation for demand for bread at a small bakery is Q^d = 60 - 10P + 3Y, where Q^d is the quantity of
b
bread demanded in loaves, P is the price of bread in dollars per loaf, and Y is the average income in the town in
b
thousands of dollars. Assume also that the equation for supply of bread is Q^s = 30 + 20P - 30 P , where Q^s is the
b f
quantity supplied and P is the price of flour in dollars per pound. Assume finally that markets clear, so that Q^d = Q^s.
f
a. If Y is 10 and P is $1, solve mathematically for equilibrium Q and P .
f b
b. If the average income in the town increases to 15, solve for the new equilibrium Q and P .
b

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Definitions:

Denominated

Refers to the currency in which a financial obligation or asset is expressed or required to be settled.

Australian Dollars

The currency of Australia, represented by the symbol AUD, and used as the legal tender in Australia and its territories.

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