The demand and supply functions for oil in a small isolated country are Q d = 210
Question:
The demand and supply functions for oil in a small isolated country are Qd = 210 − 1.5p and Qs = −140 + 2p, where p is the price per barrel and quantities are in millions of barrels per year.
a. Use Excel to calculate the quantity demanded and quantity supplied for p = $70, $75, $80, …, $140 (in $5 increments). Determine the equilibrium price and quantity.
b. Use Excel’s charting tool to draw the demand and supply curves you derived in part a and graphically determine the equilibrium calculated in part a.
c. Now, assume that the government imposes a price ceiling of $80 per barrel. Use the spreadsheet from part a to determine the amount of any excess demand or excess supply. How much oil is sold?
d. The government abandons the price ceiling described in part c and imposes a price floor of $110 per barrel instead. Use your spreadsheet to determine any excess demand or excess supply now. How much oil is sold?
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p Q d Q s Excess Demand 70 105 0 105 75 975 10 875 80 90 20 70 85 825 ...View the full answer
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