Assume the Demand Function for Scooters Is Given by QD

question 7

Multiple Choice

Assume the demand function for scooters is given by QD = 20,000 - 10P + 0.2I, where P = price of a scooter, and I = average income of consumers. Also, assume the supply function of scooters is given by QS = 20 P. If the market for scooters is perfectly competitive, and the average income of consumers is $20,000, what are the equilibrium price and quantity in this market?

• A) The equilibrium price is $16,000, and 800 scooters are traded.
• B) The equilibrium price is $1,600, and 32,000 scooters are traded.
• C) The equilibrium price is $800, and 16,000 scooters are traded.
• D) The equilibrium price is $800, and 32,000 scooters are traded.

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Definitions:

Discount

A reduction from the usual cost of something, often applied to encourage sales or provided for early payment.

Net Operating Income

A company's total earnings from its operations, excluding taxes and other non-operational expenses, indicating the profitability of core business activities.

Traceable Fixed Expenses

Fixed costs that can be directly associated with a specific product, department, or segment of a business.

Common Fixed Expenses

Recurring expenses that do not vary with the level of production or sales, shared by multiple departments or products.