This problem involves solving demand and supply equations together to determine price and quantity.

a. Consider a demand curve of the form

QD= 2P + 20

where QDis the quantity demanded of a good and P is the price of the good. Graph this demand curve. Also draw a graph of the supply curve

QS= 2P 4

where QSis the quantity supplied. Be sure to put P on the vertical axis and Q on the horizontal axis. Assume that all the QSand Ps are nonnegative for parts a, b, and c. At what values of P and Q do these curves intersect that is, where does QD= QS?

b. Now suppose at each price that individuals demand four more units of outputthat the demand curve shifts to

QD' = 2P + 24

Graph this new demand curve. At what values of P and Q does the new demand curve intersect the old supply curvethat is, where does QD' = QS?

c. Now, finally, suppose the supply curve shifts to

QS' = 2P 8

Graph this new supply curve. At what values of P and Q does QD' = QS'? You may wish to refer to this simple problem when we discuss shifting supply and demand curves in later sections of this book.