Question 3 (20 marks)
Suppose the demand schedule for sports T-shirts at UIC in 2021 is given by the equation QP = 1000 – 5P, where Q is the quantity demanded and P is the price. The supply schedule of sports T-shirts at UIC in 2021 is given by the equation QS = 5P – 200, where Q$ is the quantity supplied.
a. (4 marks) What is the equilibrium price in this market? What is the equilibrium quantity in this market?
b. (4 marks) Suppose the price is currently 100 in this market. Is there a shortage or surplus in this market, and how large is the shortage/surplus?
c. (4 marks) Suppose the price is currently equal to 150 in this market. Is there a shortage or surplus in this market, and how large is the shortage/surplus?
d. (8 marks) Suppose the demand curve in 2022 shifts to Q$ = 1200 – 5P. What is the new equilibrium price and quantity in this market? Indicate the change of equilibrium point from 2021 to 2022 clearly in a graph.
