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1. Suppose U.S. market demand for Chinese produced automobiles is Q=120,000−PQ=120,000-P...
Jun 10, 2024
Generated Graph
Solution by Steps
step 1
To find the competitive market equilibrium price and output of Chinese produced automobiles in the U.S., we need to set the demand equal to the supply. The demand function is Q=120,000−PQ = 120,000 - P and the supply function is Q=3PQ = 3P
step 2
Set the demand equal to the supply: 120,000−P=3P120,000 - P = 3P
step 3
Solve for PP: 120,000=4P  ⟹  P=120,0004=30,000120,000 = 4P \implies P = \frac{120,000}{4} = 30,000
step 4
Substitute P=30,000P = 30,000 back into either the demand or supply function to find QQ: Q=3×30,000=90,000Q = 3 \times 30,000 = 90,000
Answer
The competitive market equilibrium price is $30,000 and the output is 90,000 units.
Key Concept
Market Equilibrium
Explanation
Market equilibrium occurs where the quantity demanded equals the quantity supplied.
Solution by Steps
step 1
To find the new market equilibrium price to U.S. buyers and output of Chinese produced automobiles in the U.S. after a 2,000tariff,weneedtoadjustthesupplyfunction.Thenewsupplyfunctionwillbe2,000 tariff, we need to adjust the supply function. The new supply function will be Q = 3(P - 2,000)$
step 2
Set the new supply function equal to the demand function: 120,000−P=3(P−2,000)120,000 - P = 3(P - 2,000)
step 3
Simplify and solve for PP: 120,000−P=3P−6,000  ⟹  120,000+6,000=4P  ⟹  126,000=4P  ⟹  P=126,0004=31,500120,000 - P = 3P - 6,000 \implies 120,000 + 6,000 = 4P \implies 126,000 = 4P \implies P = \frac{126,000}{4} = 31,500
step 4
Substitute P=31,500P = 31,500 back into the new supply function to find QQ: Q=3(31,500−2,000)=3×29,500=88,500Q = 3(31,500 - 2,000) = 3 \times 29,500 = 88,500
Answer
The new market equilibrium price to U.S. buyers is $31,500 and the output is 88,500 units.
Key Concept
Tariff Impact
Explanation
A tariff increases the price of imported goods, shifting the supply curve and resulting in a new equilibrium.
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