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Best friends Scott Baio and Willie Aames decide to open up a movie poster shop in downtown Los Angeles
Best friends Scott Baio and Willie Aames decide to open up a movie poster shop in downtown Los Angeles. The following relationships describe the supply and demand for movie posters:
Qd = 65,000 – 10,000P
Qs = -35,000 + 15,000P
Where Q is the quantity and P is the price of a movie poster in dollars.
(a) Complete the following table (with excel formula explained) (b) What is the equilibrium price?
| Price | Qs | Qd | Qs-Qd | Surplus/Shortage |
| $6.00 | ||||
| $5.50 | ||||
| $5.00 | ||||
| $4.50 | ||||
| $4.00 | ||||
| $2.00 | ||||
| $2.50 |
Expert Solution
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Put values of Price in demand and supply equation:
b) Equilibrium occurs when demand = supply which occurs when price is $4.00 and quantity traded is 25,000.
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