Question: Suppose the demand for towels is given by QD = 100 - 5P, and the supply of towels is given by QS = 10P. a.

Suppose the demand for towels is given by QD = 100 - 5P, and the supply of towels is given by QS = 10P.
a. Derive and graph the inverse supply and inverse demand curves.
b. Solve for the equilibrium price and quantity.
c. Suppose that supply changes so that at each price, 20 fewer towels are offered for sale. Derive and graph the new inverse supply curve.
d. Solve for the new equilibrium price and quantity. How does the decrease in supply affect the equilibrium price and quantity sold?
e. Suppose instead that supply does not change, but demand decreases so that at each price 25 fewer towels are desired by consumers. Solve for the new equilibrium price and quantity. How does the decrease in demand affect the equilibrium price and quantity sold? How do those changes compare to your response in (d)?

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a The inverse supply is P Q S 10 Whereas the inverse demand is P 20 15 Q D The graph is shown at the ... View full answer

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