1. Problem 1: Effects on equilibrium price (P) and quantity demanded (QD) due to changes in economic factors. 1. If consumer income increases: - For a normal good, demand increases, shifting the demand curve right. - This raises equilibrium price and quantity. 2. If the rent that the firm pays decreases: - This reduces production costs, shifting supply curve right. - This lowers the equilibrium price and raises quantity. 3. If the expected price of the good decreases: - Consumers expect lower future prices, reducing current demand. - Demand curve shifts left, lowering P and QD. 4. If the price of a substitute good increases: - Demand for the good increases as consumers switch. - Demand curve shifts right, raising P and QD. --- 2. Problem 2: Given curves: Demand: $$Q_D = 800 - 2P$$ Supply: $$Q_S = 200 + P$$ 1. Find equilibrium price: Set $$Q_D=Q_S$$ $$800 - 2P = 200 + P$$ Simplify: $$800 - 200 = 2P + P$$ $$600 = 3P$$ $$P^* = \frac{600}{3} = 200$$ 2. Find equilibrium quantity: Substitute $$P^*$$ into one curve: $$Q^* = 800 - 2(200) = 800 - 400 = 400$$ 3. Equilibrium on curves: Demand curve: $$y = 800 - 2x$$ (price on x-axis, quantity y?) or as given. Supply curve: $$y = 200 + x$$ The intersection point is at $$P=200, Q=400$$. 4. For $$P=300$$: Demand: $$Q_D = 800 - 2(300) = 800 - 600 = 200$$ Supply: $$Q_S = 200 + 300 = 500$$ Since supply > demand, there is excess supply (surplus). Surplus value: $$500 - 200 = 300$$ 5. For $$P=100$$: Demand: $$Q_D=800 - 2(100)=800 - 200=600$$ Supply: $$Q_S=200 + 100=300$$ Since demand > supply, there is excess demand (shortage). Shortage value: $$600 - 300 = 300$$ Final answers: Equilibrium price = 200 Equilibrium quantity = 400 Excess supply at P=300 = 300 units Excess demand at P=100 = 300 units