Consider the following demand schedule for bottles of water:
PRICE (P) Quantity Demanded by Consumers
(bottles / month)
$0.50 ................1,100
1.00...............1,050
1.50...............1,000
2.00...............950
2.50...............900
3.00...............850
3.50...............800
4.00...............750
4.50...............700
5.00...............650
The equations representing demand, inverse demand, supply and inverse supply are as follows:
Demand: Qd = - 100P + 1,150
Inverse Demand: P = - 0.01 Qd + 11.5
Supply: Qs = 400 P - 100
Inverse Supply: P = 0.0025 Qs + .25
Using this information, determine the equilibrium price and quantity for bottled water in this market. Explain what will happen in the market if price equals $4.00. What will happen if price equals $2.00?