,SOLUTION MANUAL FOR Managerial Economics
and Strategy, 4th edition Jeffrey M. Perloff
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
,CHAPTER 2
SUPPLY AND DEMAND
SOLUTIONS TO END-OF-CHAPTER QUESTIONS
Demand
1.1 When the price of coffee changes, the change in the quantity demanded reflects a
movement along the demand curve. When other variables that affect demand
change, the entire demand curve shifts. For example, when income changes, this
causes coffee demand to shift.
∂Q
1.2 = 0.1.
∂Y
An increase in Y shifts the demand curve to the right, from D1 to D2.
1.3 The relationship between the quantity of coffee (𝑄𝑄) and the price of sugar (𝑝𝑝𝑠𝑠 ) is
defined by the coefficient on the 𝑝𝑝𝑠𝑠 term in the equation. Since this coefficient is
negative (it’s value is −0.3), an increase in the price of sugar (𝑝𝑝𝑠𝑠 ) will decrease the
quantity of coffee. This is the definition of a complementary good. More
specifically, if the price of sugar goes up by $1.00 per pound, then the demand for
coffee will fall by 300,000 tons.
116
Copyright © 2026 Pearson Education, Inc.
, Solutions Manual—Chapter 2/Supply and Demand 117
1.4 The market demand curve is the sum of the quantity demanded by individual
consumers at a given price. Graphically, the market demand curve is the horizontal
sum of individual demand curves.
1.5 a. The inverse demand curve for other town residents is p = 200 − 0.5Qr.
b. At a price of $300, college students demand 100 units of firewood, and other
residents demand no firewood. Other residents will demand zero units of
firewood if the price is greater than or equal to $200.
c. The market demand curve is the horizontal sum of individual demand curves, as
illustrated below.
117
Copyright © 2026 Pearson Education, Inc.
,118 Perloff/Brander, Managerial Economics and Strategy, Fourth Edition
Supply
2.1 The effect of a change in pf on Q is
∆Q
= −20pf
∆p f
∆Q
= −20(1.10)
∆p f
∆Q
= −22 units.
∆p f
Thus, an increase in the price of fertilizer will shift the avocado supply curve to the
left by 22 units at every price (i.e., a parallel shift to the left).
2.2 When the price of avocados changes, the change in the quantity supplied reflects a
movement along the supply curve. When costs or other variables that affect supply
change, the entire supply curve shifts. For example, the price of fertilizer represents
a key factor of avocado production, which affects the cost of avocado production,
shifting the avocado supply curve. This is because avocado prices are measured on
a graph axis. Other factors that affect supply are not measured by a graph axis.
2.3 Given the supply function,
Q = 58 + 15p–20pf,
The effect of a change in p on Q is
∆Q
= 15p.
∆p
To change quantity by 60, price would need to change by
60 = 15p
p = $4.00.
118
Copyright © 2026 Pearson Education, Inc.
, Solutions Manual—Chapter 2/Supply and Demand 119
2.4 The market supply curve is the sum of the quantity supplied by individual
producers at a given price. Graphically, the market supply curve is the horizontal
sum of individual supply curves.
2.5 When the demand curve is steep (as shown in the diagram below), then a shift to the
left (inward) of the supply of wine will result in relatively large increases in price
and relatively small decreases in quantity. In the diagram, the shift from S1 to S2
drives up price from P1 to P2.
119
Copyright © 2026 Pearson Education, Inc.
,120 Perloff/Brander, Managerial Economics and Strategy, Fourth Edition
Market Equilibrium
3.1 The supply curve is upward sloping and intersects the vertical price axis at $6. The
demand curve is downward sloping and intersects the vertical price axis at $4.
When all market participants are able to buy or sell as much as they want, we say
that the market is in equilibrium: a situation in which no participant wants to change
its behavior. Graphically, a market equilibrium occurs where supply equals
demand. An equilibrium does not occur at a positive quantity because supply does
not equal demand at any price.
3.2 The equilibrium price is p = $300, and the equilibrium quantity is Q = 2000.
3.3 Given that ps = $0.20, pc = $5, and Y = $55,000 (note Y is measured in thousands,
so the value to use here is 55), the demand for coffee can be rewritten as
Q = 14 − p
and the supply of coffee can be rewritten as
Q = 8.6 + 0.5p.
When all market participants are able to buy or sell as much as they want, we say
that the market is in equilibrium: a situation in which no participant wants to change
its behavior. Graphically, a market equilibrium occurs where supply equals
demand. Thus, the equilibrium price is
D=S
14 − p = 8.6 + 0.5p
5.4 = 1.5p
p = $3.60.
120
Copyright © 2026 Pearson Education, Inc.
, Solutions Manual—Chapter 2/Supply and Demand 121
Find the equilibrium quantity by substituting this price into either the supply or
demand function. For example, using the supply function, the equilibrium quantity
is
Q = 8.6 + 0.5p
Q = 8.6 + 0.5(3.60)
Q = 8.6 + 1.8
Q = 10.4 units.
3.4 If Y = $55,000, ps = 0.20, pc = $5, and p = 4, the quantity demanded is Q = 8.56 − 4
− 0.3(0.2) + 0.1(55) = 10. The quantity supplied is Q = 9.6 + 0.5(4) − 0.2(5) = 10.6.
There is an excess supply equal to 10.6 − 10.0 = 0.6 in this case. Because of the
excess supply, firms unable to sell at the price of $4 would lower their prices,
forcing the market price down. Price would fall until the equilibrium price was
reached.
3.5 The implication is that the price of stocks rose due to excess demand. If this excess
demand was caused and a rightward shift of the demand curve, then the complete
effect is an increase in the price of stocks along with an increases in the quantity of
stocks traded.
121
Copyright © 2026 Pearson Education, Inc.
,122 Perloff/Brander, Managerial Economics and Strategy, Fourth Edition
Shocks to the Equilibrium
4.1 a. The new equilibrium with the horizontal supply curve is where the new demand
curve intersects the horizontal supply curve. The new equilibrium price is
unchanged. See figure.
b. The new equilibrium with the vertical supply curve is where the new demand
curve intersects the vertical supply curve. The new equilibrium price is higher.
See figure.
c. The new equilibrium with the upward-sloping supply curve is where the new
demand curve intersects the upward-sloping supply curve. The new equilibrium
price is higher. See figure.
122
Copyright © 2026 Pearson Education, Inc.
, Solutions Manual—Chapter 2/Supply and Demand 123
4.2 a. Health benefits from drinking coffee shift the demand curve for coffee to the
right because more coffee is now demanded at each price. The new market
equilibrium is where the original supply curve intersects the new coffee demand
curve, at a higher price and larger quantity.
b. An increase in the usefulness of cocoa will increase demand for cocoa. This
will drive up the equilibrium price of cocoa. Since cocoa and coffee are
likely substitutes, this will increase the demand for coffee. The new market
equilibrium is where the original supply curve intersects the new coffee
demand curve, at a higher price and higher quantity.
123
Copyright © 2026 Pearson Education, Inc.
and Strategy, 4th edition Jeffrey M. Perloff
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
,CHAPTER 2
SUPPLY AND DEMAND
SOLUTIONS TO END-OF-CHAPTER QUESTIONS
Demand
1.1 When the price of coffee changes, the change in the quantity demanded reflects a
movement along the demand curve. When other variables that affect demand
change, the entire demand curve shifts. For example, when income changes, this
causes coffee demand to shift.
∂Q
1.2 = 0.1.
∂Y
An increase in Y shifts the demand curve to the right, from D1 to D2.
1.3 The relationship between the quantity of coffee (𝑄𝑄) and the price of sugar (𝑝𝑝𝑠𝑠 ) is
defined by the coefficient on the 𝑝𝑝𝑠𝑠 term in the equation. Since this coefficient is
negative (it’s value is −0.3), an increase in the price of sugar (𝑝𝑝𝑠𝑠 ) will decrease the
quantity of coffee. This is the definition of a complementary good. More
specifically, if the price of sugar goes up by $1.00 per pound, then the demand for
coffee will fall by 300,000 tons.
116
Copyright © 2026 Pearson Education, Inc.
, Solutions Manual—Chapter 2/Supply and Demand 117
1.4 The market demand curve is the sum of the quantity demanded by individual
consumers at a given price. Graphically, the market demand curve is the horizontal
sum of individual demand curves.
1.5 a. The inverse demand curve for other town residents is p = 200 − 0.5Qr.
b. At a price of $300, college students demand 100 units of firewood, and other
residents demand no firewood. Other residents will demand zero units of
firewood if the price is greater than or equal to $200.
c. The market demand curve is the horizontal sum of individual demand curves, as
illustrated below.
117
Copyright © 2026 Pearson Education, Inc.
,118 Perloff/Brander, Managerial Economics and Strategy, Fourth Edition
Supply
2.1 The effect of a change in pf on Q is
∆Q
= −20pf
∆p f
∆Q
= −20(1.10)
∆p f
∆Q
= −22 units.
∆p f
Thus, an increase in the price of fertilizer will shift the avocado supply curve to the
left by 22 units at every price (i.e., a parallel shift to the left).
2.2 When the price of avocados changes, the change in the quantity supplied reflects a
movement along the supply curve. When costs or other variables that affect supply
change, the entire supply curve shifts. For example, the price of fertilizer represents
a key factor of avocado production, which affects the cost of avocado production,
shifting the avocado supply curve. This is because avocado prices are measured on
a graph axis. Other factors that affect supply are not measured by a graph axis.
2.3 Given the supply function,
Q = 58 + 15p–20pf,
The effect of a change in p on Q is
∆Q
= 15p.
∆p
To change quantity by 60, price would need to change by
60 = 15p
p = $4.00.
118
Copyright © 2026 Pearson Education, Inc.
, Solutions Manual—Chapter 2/Supply and Demand 119
2.4 The market supply curve is the sum of the quantity supplied by individual
producers at a given price. Graphically, the market supply curve is the horizontal
sum of individual supply curves.
2.5 When the demand curve is steep (as shown in the diagram below), then a shift to the
left (inward) of the supply of wine will result in relatively large increases in price
and relatively small decreases in quantity. In the diagram, the shift from S1 to S2
drives up price from P1 to P2.
119
Copyright © 2026 Pearson Education, Inc.
,120 Perloff/Brander, Managerial Economics and Strategy, Fourth Edition
Market Equilibrium
3.1 The supply curve is upward sloping and intersects the vertical price axis at $6. The
demand curve is downward sloping and intersects the vertical price axis at $4.
When all market participants are able to buy or sell as much as they want, we say
that the market is in equilibrium: a situation in which no participant wants to change
its behavior. Graphically, a market equilibrium occurs where supply equals
demand. An equilibrium does not occur at a positive quantity because supply does
not equal demand at any price.
3.2 The equilibrium price is p = $300, and the equilibrium quantity is Q = 2000.
3.3 Given that ps = $0.20, pc = $5, and Y = $55,000 (note Y is measured in thousands,
so the value to use here is 55), the demand for coffee can be rewritten as
Q = 14 − p
and the supply of coffee can be rewritten as
Q = 8.6 + 0.5p.
When all market participants are able to buy or sell as much as they want, we say
that the market is in equilibrium: a situation in which no participant wants to change
its behavior. Graphically, a market equilibrium occurs where supply equals
demand. Thus, the equilibrium price is
D=S
14 − p = 8.6 + 0.5p
5.4 = 1.5p
p = $3.60.
120
Copyright © 2026 Pearson Education, Inc.
, Solutions Manual—Chapter 2/Supply and Demand 121
Find the equilibrium quantity by substituting this price into either the supply or
demand function. For example, using the supply function, the equilibrium quantity
is
Q = 8.6 + 0.5p
Q = 8.6 + 0.5(3.60)
Q = 8.6 + 1.8
Q = 10.4 units.
3.4 If Y = $55,000, ps = 0.20, pc = $5, and p = 4, the quantity demanded is Q = 8.56 − 4
− 0.3(0.2) + 0.1(55) = 10. The quantity supplied is Q = 9.6 + 0.5(4) − 0.2(5) = 10.6.
There is an excess supply equal to 10.6 − 10.0 = 0.6 in this case. Because of the
excess supply, firms unable to sell at the price of $4 would lower their prices,
forcing the market price down. Price would fall until the equilibrium price was
reached.
3.5 The implication is that the price of stocks rose due to excess demand. If this excess
demand was caused and a rightward shift of the demand curve, then the complete
effect is an increase in the price of stocks along with an increases in the quantity of
stocks traded.
121
Copyright © 2026 Pearson Education, Inc.
,122 Perloff/Brander, Managerial Economics and Strategy, Fourth Edition
Shocks to the Equilibrium
4.1 a. The new equilibrium with the horizontal supply curve is where the new demand
curve intersects the horizontal supply curve. The new equilibrium price is
unchanged. See figure.
b. The new equilibrium with the vertical supply curve is where the new demand
curve intersects the vertical supply curve. The new equilibrium price is higher.
See figure.
c. The new equilibrium with the upward-sloping supply curve is where the new
demand curve intersects the upward-sloping supply curve. The new equilibrium
price is higher. See figure.
122
Copyright © 2026 Pearson Education, Inc.
, Solutions Manual—Chapter 2/Supply and Demand 123
4.2 a. Health benefits from drinking coffee shift the demand curve for coffee to the
right because more coffee is now demanded at each price. The new market
equilibrium is where the original supply curve intersects the new coffee demand
curve, at a higher price and larger quantity.
b. An increase in the usefulness of cocoa will increase demand for cocoa. This
will drive up the equilibrium price of cocoa. Since cocoa and coffee are
likely substitutes, this will increase the demand for coffee. The new market
equilibrium is where the original supply curve intersects the new coffee
demand curve, at a higher price and higher quantity.
123
Copyright © 2026 Pearson Education, Inc.
