Suppose that supply changes such that at each price, 20 fewer towels are offered for sale. In other words, the new supply is now S=10P−20QS=10P−20 . Derive and plot the new inverse supply curve by moving the endpoints of the line labeled Supply 2. d. Find the new equilibrium price and quantity using Demand 1 and Supply 2. Equilibrium price: $ Equilibrium quantity: towels

1) Correct supply function according to the state information

S=10P−20

Slope 10

2)

Equilibrium

Q = 60

P = $8

missing information:

Demand QD = 100 − 5P

Explanation:

The supply is variable for price and we are given the information that for each price there are 20 fewer towels thus, there is a constant decreased of 20 at each level of the curve.

S' = 10P

S'' = 10

The slope of the curve is 10

Equilibrium of D1 and S2

100 - 5P = 10P - 20

120 = 15P

8 = P

Supplu Quantity = 10 x 8 - 10 = 60

Demand Quantity = 100 - 5 x 8 = 100 - 40 = 60

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