Last modified on 29 July 2008, at 21:25

Fundamentals of Transportation/Economics/Solution

TProblem
Problem:

A poll is taken in regards to a sports car. Of the 1000 people in the class, the polling results came back for the two series of questions:

Question 1:

  • How many people would buy a brand new sports car for $500,000: 10 people
  • How many people would buy a brand new sports car for $50,000: 95 people
  • How many people would buy a brand new sports car for $5,000: 812 people
  • How many people would buy a brand new sports car for $500: 995 people
  • How many people would buy a brand new sports car for $50: 999 people
  • How many people would buy a brand new sports car for $5: 1000 people

Question 2:

  • How many people would sell their brand new sports car for $500,000: 995 people
  • How many people would sell their brand new sports car for $50,000: 500 people
  • How many people would sell their brand new sports car for $5,000: 90 people
  • How many people would sell their brand new sports car for $500: 3 people
  • How many people would sell their brand new sports car for $50: 1 person
  • How many people would sell their brand new sports car for $5: 0 people

What would be the appropriate balance of price and people interested?

Example
Solution:

This is a supply and demand curve. The demand for a car increases as price goes down while the supply of people for cars goes up as the price goes up. The balance would be at the point of intersect of the two curves. The Y-axis would be price of car while the X-axis would be number of people

Looking at the $50,000 and $5,000, we can see that the number of people goes from 95 to 812 for demand while the number goes from 500 to 90 for supply. Somewhere between these two points, the lines intersected. If one were to draw out the curves in detail, they could interpolate the intersection point to be approximately at $25,000, with a number of buyers and sellers being equal to 350.