Economics Model Answers Two Introductory: 1. In a free market,
the price and quantity at which goods are sold are where
__________ equals ___________. supply equals demand 2. Suppose
the price demand curve is P = $20 - Q, where P is price and Q is
quantity. Also suppose the price supply curve is P = $4 + Q. At
what price and quantity will the good be sold? The good is sold
where supply equals demand. That means the supply P must equal
the demand P, and the supply Q must equal the demand Q. This can
be found by graphing the above two equations and seeing where
they intersect, or by solving them by setting P to the same
value in both: - P = $20 − Q - P = $4 + Q - 20 − Q = 4 + Q - 20
= 4 + 2Q - 4 + 2Q = 20 - 2Q = 16 - Q = 8 Plugging this back into
the first equation gives P: - P = $20 − Q = $20 − 8 = $12
Checking our work, we plug this P and Q into the second
equation: - 12 = 4 + 8 = 12 Answer: Q = 8, P = $12 Intermediate:
3. Draw the supply and demand for air. In addition, draw the
supply and demand for a good