ECO 550 – Managerial Economics
Office building maintenance plans call for the stripping, waxing, and buffing of ceramic floor tiles. This work is contracted out to office maintenance firms, and both technology and labor requirements are very basic. Supply and demand conditions in this perfectly competitive service market in New York are: |QS = 2P - 20 |(Supply) | |QD = 80 - 2P |(Demand) |
Where Q is thousands of hours of floor reconditioning per month, and P is the price per hour. A. Algebraically determine the market equilibrium price/output combination. B. Use a graph to confirm your answer.
For the graph, use prices: 10, 20,30,40,50,60,70,80,90; and Quantities:5,10,15,20,25,30,35,40,45,50,55,60,65 Answer
Part A, at the equilibrium point, QD=QS
P=25 this is the equilibrium price
QD (at P=25) = 80-(2*25) = 30
QS (at P=25) = (2*25)-20 = 30
Equilibrium Price =$25 per hour
Equilibrium Quantity=30 thousands of hours of floor reconditioning per month. Part B, the first step is to find the quantity demanded and quantity supplied need to be established in regards to prices provided. |Price |QD=80 - 2p |QS =2p-20 | |10 |60 |0 | |20 |40 |20 | |30 |20 |40 | |40 |0 |60 | |50 |-20 |80 | |60 |-40 |100 | |70 |-60 |120 | |80 |-80 |140 | |90 |-100 |160 |
The second step is to graph where...
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