Question

In Exhibit 4-7, a 100 unit decrease in quantity demanded at every price level would cause the new equilibrium price to become:

Answer 1

If there was a 100 units decrease at every price level, the new equilibrium price would be $2.00.

Equilibrium Price

• Price where quantity demanded is equal to quantity supplied.

What is the New Equilibrium price?

Reducing by 100 units, all the quantity demanded units will lead to the following new units:

• $10 - 100
• $8 - 140
• $6 - 270
• $4 - 290
• $2 - 310

We can see that at $2, both the demand and supply are at 310 units which makes this the new equilibrium.

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