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1. Suppose U.S. market demand for Chinese produced automobiles is Q=120,000−PQ=120,000-P...
Jul 14, 2024
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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 30,000andtheoutputis30,000 and the output is 90,000.
Key Concept
Market Equilibrium
Explanation
Market equilibrium is found 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 tariff of 2,000,weneedtoadjustthesupplyfunctiontoaccountforthetariff.Thenewsupplyfunctionbecomes2,000, we need to adjust the supply function to account for the tariff. The new supply function becomes 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 31,500andtheoutputis31,500 and the output is 88,500.
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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