1. Section 1.4 – Day 2
Market Equilibrium

2. 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 and method 2 is given by C2(x) = 10x 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 x = 500 (they break-even when 500 units are made) Method 2 : 40x = 10x x = 1000 (break-even when 1000 units are made) They should use method 1

3. 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) = Method 2: (10)(1500) = Method 1 is the best option b) Method 1: (20)(3000) = Method 2: (10)(3000) = Method 2 is the best option

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

5. 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

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

7. HOMEWORK
#1 p eoo, p eoo
#2 p20 39 – 65 odd, omit 55, on 57&59 ignore instructions referring to problem 55
#3 p – 19 odd
#4 p , 25 – 39 odd
#5 p all
#6 p – 21 odd