Question

Assume that the demand for a commodity is represented by the equation Qd = 300-50P and supply by the equation Qs= -100+150P where Qd and Qs are quantity demanded and quantity supplied, respectively, and P is price. Using equilibrium condition Qd = Qs, solve the equation to determine equilibrium price and quantity.

Answer 1

Given that the demand function for a commodity is, Qd = 300 - 50P, and the supply function for a commodity is given by, QS = -100 + 150P.

To find the equilibrium quantity and equilibrium price we must equate the both equations as, Qd = Qs

By doing so we get, 300 -50P = -100 + 150P

300 + 100 = 150P + 50P

400 = 200P

P = 400 / 200 = $2//

Now we got the value of equilibrium price as $2. We substitute the value of P in either the Qs or Qd equations.

Qd = 300 - 50*(2)

= 300 - 100

= 200 //

Hence the equilibrium quantity is 200 and equilibrium price is $2.