1. Office building maintenance plans call for thestripping, waxing, and buffing

Question

1. Office building maintenance plans call for thestripping, waxing, and buffing of ceramic floor tiles. This work iscontracted out to office maintenance firms, and both technology andlabor requirements are very basic.

     Supply and demand conditions in thisperfectly competitive service market in New York are:

QS = 2P - 20

(Supply)

QD = 80 - 2P

(Demand)

- where Q is thousands of hours of floor reconditioningper month, and P is the price per hour.

A.

Algebraically determine the market equilibrium price/outputcombination.

B.

Use a graph to confirm your answer.

For the graph, use prices: 10, 20,30,40,50,60,70,80,90

andQuantities:5,10,15,20,25,30,35,40,45,50,55,60,65

     Supply and demand conditions in thisperfectly competitive service market in New York are:

QS = 2P - 20

(Supply)

QD = 80 - 2P

(Demand)

- where Q is thousands of hours of floor reconditioningper month, and P is the price per hour.

A.

Algebraically determine the market equilibrium price/outputcombination.

B.

Use a graph to confirm your answer.

For the graph, use prices: 10, 20,30,40,50,60,70,80,90

andQuantities:5,10,15,20,25,30,35,40,45,50,55,60,65

QS = 2P - 20

(Supply)

QD = 80 - 2P

(Demand)

Explanation / Answer

1. A. First, solve for equilibrium price and quantity. Do that by setting Qs=Qd.       2P-20=80-2P -> put allthe P's to one side, the round numbers to the other.       Thus 4P = 100 -> solvefor P by dividing by 4 on both sides       Thus P =25 and 25 is yourequilibrium price    Solve for Q by plugging P into eitherequation    Qs=2(25)-20=50-20=30       Qd=80-2(25)=80-50=30    Thus Q=30 The equilibrium Price and Quantity are $25/hr and 30,000 hoursper month B. Do a quick demand and supply schedule for the givenprices. Just plug in the given prices to the equation. Price         Qd         Qs 10              60         0 20              40         20 30               20         40 40               0            60 50             -20(omit) 80 60            -40(omit)   100 70            -60(omit)   120 80            -80(omit)   140 90            -100(omit)   160 Now, plot those points on a graph, and you'll see the linesintersect at P=25 and Q=30.

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