Section 1.4 – Day 2 Market Equilibrium

A company has 2 ways to produce a product A company has 2 ways to produce a product. The cost for the 1st method is given by C1(x) = 20x + 10000 and method 2 is given by C2(x) = 10x + 30000. If the sales are expected to be 800 units at $40 each which method should they use? We will find the break-even point for each – we know R(x) = 40x in each case. Method 1: 40x = 20x + 10000 x = 500 (they break-even when 500 units are made) Method 2 : 40x = 10x + 30000 x = 1000 (break-even when 1000 units are made) They should use method 1

Using the same info which method is best if they plan to sell a) 1500 units and b) 3000 units Since the profit is the same with each method we are only concerned about which has the lower cost and we will choose that. a) Method 1: (20)(1500) + 10000 = 40000 Method 2: (10)(1500) + 30000 = 45000 Method 1 is the best option b) Method 1: (20)(3000) + 10000 = 70000 Method 2: (10)(3000) + 30000 = 60000 Method 2 is the best option

Market Equilibrium occurs when the quantity produced is equal to the quantity demanded. supply curve price demand curve x units Equilibrium Point

Ex. The maker of a plastic container has determined that the demand equation for its product is and the supply equation is - in both equations p is the price in dollars and x is in units of 100. Find the equilibrium price and quantity

The equilibrium price and quantity Solve and simultaneously. The equilibrium quantity is 960 units at a price of $2.44 per unit.

HOMEWORK #1 p 8 1-29 eoo, p 19 1-37 eoo #2 p20 39 – 65 odd, omit 55, on 57&59 ignore instructions referring to problem 55 #3 p 32 1 – 19 odd #4 p 33 21, 25 – 39 odd #5 p 42 1- 10 all #6 p 42 11 – 21 odd