The market supply curve for a certain product is given by the following formula: Ps(Qs)=10+5 Qg. The demand curve is given by PD(QD)=190-10QD: Assume that the willingness-to-pay for the product drastically increases for most of the customers: The new demand curve is perfectly inelastic (i.e., the price elasticity of demand is zero). Assume that the new equilibrium price is still at 70. c) Draw the new demand curve in your diagram from b). Briefly explain, why you drew it that way? d) What is the new equilibrium demand? e) Are the producers better off after the increase in the willingness-to-pay for the product?

The market supply curve for a certain product is given by the following formula: Ps(Qs)=10+5 Qg. The demand curve is given by PD(QD)=190-10QD: Assume that the willingness-to-pay for the product drastically increases for most of the customers: The new demand curve is perfectly inelastic (i.e., the price elasticity of demand is zero). Assume that the new equilibrium price is still at 70. c) Draw the new demand curve in your diagram from b). Briefly explain, why you drew it that way? d) What is the new equilibrium demand? e) Are the producers better off after the increase in the willingness-to-pay for the product?

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter5: Supply, Demand, And Price: Applications

Section5.7: Application 7: Why Do Colleges Use Gpa,s Actss, And Sats, For Purposes Of Admission?

Problem 2ST

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