Question

Sheila is hosting a large diplomatic event and needs to increase her inventory of dinnerware sets. She has set a $1925 budget and will choose dinnerware that will give her as much utility as possible. She shops online at Dinnerware Outlet and finds a deal for 30 sets of dinnerware on sale for $35 and she purchases them. A few days later, an email notifies her that another website called DinnerTime offers a deal for 35 sets of dinnerware for $25, while all other prices remain the same, and she snags them too. Given this information, plot Sheila's demand curve for plates and cups.

Answer 1

Answer:

Demand curve for Sheila's plates and cups

$Q = 22.5 - \frac{1}{2}P$

Explanation:

we have to write the demand function for Shiela's

$Q = b - aP$

we solve for a solving for the line that cross two points:

$\frac{P_2-P_1}{Q_2-Q_1} = a$

$\frac{25 - 35}{35 - 30} = a$

$\frac{-10}{5} = a$

$- \frac{1}{2} = a$

Then we solve for b:

$35 = b - 1/2(25)$

$35 - 1/2(25) = b$

b = 22.5

Last we build the demand curve

$Q = 22.5 - \frac{1}{2}P$