Suppose the demand for ice cream in Philadelphia is given by Qd = 2900 – 6P where Qd is the quantity demanded, and P is the price of Ice cream. Also, suppose the supply of ice cream is given by Qs = 5P – 510, where Qs is the quantity supplied of ice cream.
a) Calculate the equilibrium price of ice cream and the equilibrium quantity of ice cream in Philadelphia. Show your work.
b) Suppose the actual price of ice cream is $320. Determine if there is a shortage, a surplus, or if the market is in equilibrium at a price of $320. If there is a shortage or surplus, calculate how much the shortage or surplus is.