(A)Determine the Equilibrium Price and Quantity If Demand Is Represented

question 7

Essay

(a)Determine the equilibrium price and quantity if demand is represented by the equation,P = 40 - .2Q_D and supply by the equation P = 10 + .4Q_S.
(b)Suppose demand changes and is now represented by the equation P = 52 - .2Q_D.Has demand increased or decreased? What is the new equilibrium price and quantity?
(c)Suppose instead supply changes and is now represented by the equation P = 16 + .4Q_S.Has supply increased or decreased? What is the new equilibrium price and quantity?

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Definitions:

Zero Growth Model

A valuation method assuming a company will not grow and will continue to pay a constant dividend indefinitely.

Stock Valuation

The process of determining the intrinsic value of a stock based on future earnings, dividend payouts, and other factors to decide whether a stock is overvalued, undervalued, or fairly priced.

Supernormal Growth Stock

Stocks of companies expected to experience higher than average growth rates in earnings or revenues in the future.