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    Practice Part A - Demand and Supply in Excel

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    Practice Part A - Demand and Supply in Excel

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    Practice Part A - Demand and Supply in Excel

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    c

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    Practice part of the group project: Application of Demand and Supply

    This, Part A, is a practice portion of the group project.


    After completing of this Part A practice, you will be able to plug the Supply & Demand curves into Excel.

    Project goal is to use the Power of Equilibrium in Economics to determine Equilibrium price (Pe) and
    Equilibrium quantity (Qe) by using a system of equations: Demand Equations & Supply Equation to
    determine an Equilibrium point.

    A Demand equation represents the relationship between Price (P) and Quantity demanded (Qd). A Supply
    equation represents the relationship between Price (P) and Quantity supplied (Qs). Using Demand and
    Supply equations and their relevant parameters to calculate how Quantity depends on Price.

    Practice the System of Linear Equations


    First step: Algebra Practice of the Supply and Demand equations

    Determine Equilibrium point algebraically. Using algebra to calculate how Qd and Qs depend on Price.
    Derive Equilibrium Price (Pe) and Equilibrium Quantity (Qe).

    Follow Chapter 3 PPTs on Supply & Demand algebraic equations.


    Practice the system of equations and write down them step by step with logical processes. Then use these
    numbers to draw supply & demand curves in a X-Y coordinate system. The following equations are
    linear demand and supply equations:

    1) P = a–b*Qd

    2) P = c+d*Qs

    Tips: From equations 1) and 2) solve Quantity Demanded (Qd) and Quantity Supplied (Qs) equations.
    Find a formula for Equilibrium price (Pe). Refer to the numbers from the textbook on page 64, then
    calculate a real number for Pe.

    Where a, b, c, and d, are parameters describing the slopes and intercepts.

    Parameter values are provided as below. These values are derived from equations on page 64 in your
    textbook. ( if you could, you can also derive these values by using algebra).

    a = 7,

    b = 0.5,

    c = 0.5,

    d = 0.25

    To find numeric solutions for the Pe and Qe.

    Pe = ? Qe = ?
    Second step: Graphical Practice of the Demand and Supply Equations in Excel

    Use Excel to graph demand and supply curves by using the given parameter values. Determine the
    Equilibrium point, Pe, Qe, graphically in Excel. This demonstrates a hypothetical market, an equilibrium
    point between quantity demanded and quantity supplied at the Equilibrium Price, Pe.

    Tips: The easiest way is to create a column of Given Quantity (Q) values. For example, we specified Q as
    a given, from 0 to 15, and Pd and Ps will be calculated for the demand curve and for the supply curve in
    separate columns. Equations you need in Excel are for Pd and Ps columns but not for the Q column.

    That is, for each Quantity, calculate a Price Demanded from Equation one (1). For each Quantity,
    calculate a Price Supplied from Equation two (2).

    Excel notations as a reference for your practice.

    =B$2-B$3*$D2 (formula for Pd)

    Column B row 2 contains the parameter a. Column B row 3 contains the parameter b.

    Column D row 2 contains the Quantity demanded value 0 and so on sequentially till 15.

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