Real-Life Math -- Solution
This is what your answer should look like:
Demand
equation: y = -0.2x + 30
Supply equation: y = 0.2 x
Because
you want to find out where they intersect, you can assume that the "y" in
both equations is the same number. Now you combine the two equations and solve
for "x".
-0.2x + 30 = 0.2x
30 = 0.2x + 0.2x
30
= x (0.2+0.2)
30 = x (0.4)
30 / 0.4 = x
x = 75
Now
you know that the quantity supplied and the quantity demanded is equal at
75 million units. But what about the price?
To find the price of the
CDs, substitute "x" = 75 into either the supply or demand equation.
Supply:
y = 0.2 (75)
y = 15
The equilibrium price of
CDs would be $15!
So, since the average price of CDs is around $13,
which is lower than the equilibrium price, you advise the South Koreans not
to build a CD plant. They decide to build small, inexpensive cars instead.
They make a fortune and give you share options in the company. You get rich
too. Good work!
As an economist, you will have to love mathematics
and problem solving.
"This job requires a strong analytical mind. Not
everyone loves economics but those that do are generally struck by it," says
Nancy Olewiler, who teaches in a university economics department.