- Suppose the market for the Toyota Yaris in a certain area has the following demand and supply curves: QD = 800 - 30 P and QS = 400 + 50P where price is for a single Prius (in thousands of dollars) and quantity is in thousands of cars sold. [3+3=63 marks]
A. What is the equilibrium price and quantity of Prius' in this market?
B. Is there a surplus or shortage in this market if the price is initially $20000? How large is the surplus or shortage? Show this situation graphically. Explain how the market would move from this price to the equilibrium price.
Sample Solution