Question

Consider a market for oil. Demand and supply of oil are given as shown. The demand for oil is: Q = 12 - 2P The supply of oil is: Q = 4P.

What is the equilibrium price of oil? (Using the two equations, solve for P)

Consider a market for oil. Demand and supply of oil are given as shown. The demand for oil is: Q = 12 - 2P The supply of oil is: Q = 4P.

What is the equilibrium quantity of oil sold?

What is the P-intercept of the Q = 12 - 2P function?

Answer 1

Finding Equilibrium Price and Equilibrium Quantity

The demand for oil is: Q = 12 - 2P

The supply of oil is: Q = 4P.

At Equilibrium Price Quantity Demanded is equal to Quantity Supplied

12 - 2P = 4P

-4P -2P = -12

6P = 12

P = 12 / 6 = 2

Put P = 2 in above equation, we get

Quantity Demanded = 12 - (2 * 2) = 12 - 4 = 8

Quantity Supplied = 4 * 2 = 8

Equilibrium Price = $2

Equilibrium Quantity = 8

Finding P Intercept

Q = 12 - 2P

To Find P Intercept, we will have to put Q = 0

Put Q = 0, we get

12 - 2P = 0

2P = 12

P = 12 / 2 = 6

P-Intercept = (0, 6) . As P is price and it is generally represented on y axis.