Compute the initial equilibrium after only supply changes

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Suppose that the demand function for apartments in a competitive market is initially D(p)=40-2p and there are 10 apartments. However, after observing how profitable it is to rent apartments, owners construct more houses and the number of available apartments increases by 100%. Then some other tenants decide to move to the town and increase the overall demand such that the new demand is given by D'(p)=60-2p. Compute the initial equilibrium (i.e., the equilibrium price and quantity), the equilibrium after only supply changes, and the terminal equilibrium which takes into account the demand change as well. Plot all cases on the same graph, clearly state the equilibrium point and the intersection points of both demand and supply curves with the axes.

Reference no: EM13235897

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