2. In economics, the supply of a product is the quantity of that product suppliers are willing to provide at a
given price. In theory, the quantity supplied of a product increases, if the price of that product increases.
Suppose that there is a linear relationship between the quantity supplied, S, of the product described in
problem 8 and its price, p. The quantity supplied weekly is 100 when the price is $2 and the quantity
supplied rises by 50 units when the price rises by $0.50.
a) Find a formula for S in terms of p.
b) Interpret the slope of your formula in economic terms.
c) Is there a price below which suppliers will not provide this product?
d) The market clearing price is the price at which sup- ply equals demand. According to theory, the
free- market price of a product is its market clearing price. Using the demand function from Problem
8, find the market clearing price for this product.
3. When economists graph demand or supply equations, they place quantity on the horizontal axis and price
on the vertical axis.
a) On the same set of axes, graph the demand and supply equations you found in Problems 8 and 9, with
price on the vertical axis.
b) Indicate how you could estimate the market clearing price from your graph.
