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:

Net Working Capital

This reflects the variance between what a business owns in the short term versus what it owes, highlighting its financial robustness and operational productivity.

Accounts Payable

Money owed by a business to its suppliers shown as a liability on the company's balance sheet.

Inventory Increase

A situation where a company experiences a rise in the level of goods and materials on hand, reflecting either a buildup in anticipation of higher sales or slower sales than expected.

Depreciation Tax Shield

The tax saving achieved by a company from deducting depreciation expenses on its taxable income.