Suppose that the demand curve for bicycles in New York City during the Fall is given by the following equation; and the supply curve for bicycles in NYC during the Fall is given by the following curve,
a) What is the choke price? What is the slope of the demand curve? What is the slope of the supply curve?
b) Graph the supply and demand curves for the market of bicycles in NYC during the Fall.
c) What is the equilibrium price and quantity in the market for bicycles in New York during the Fall?
d) Fall has started in NYC. Unexpectedly, the weather turns out to be quite warm. Happy New Yorkers decide to spend more time biking around. As result, the original demand curve for bicycles in the Fall increases by 4 bicycles at every price. What is the new demand curve? Show it in the graph in (a).
e) What is the new equilibrium price and quantity?
f) Why doesn’t the new equilibrium quantity you found in (e) also increase by 4 bicycles? Briefly explain in words.
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