Question

Market Balance

A) The generalized offer function of a product is Qs = 20 + 3p - 4Pi + 5 F

Simplify the offer function in Pi = 20 and F = 60

If the simplified function of the demand of the product is Qd = 300 - 3p; determine the price and the equilibrium quantity of the product, using the function of the offer obtained in part A.

Answer 1

We are provided the generalized offer function of a product is Qs = 20 + 3p - 4Pi + 5 F

Substitute the values of Pi = 20 and F = 60 in the function to get

Qs = 20 + 3p - 4*20 + 5*60

Qs = 240 + 3p.

This is the simplified function of the supply function.

Now the demand of the product is Qd = 300 - 3p; Find the equilibrium price and the equilibrium quantity

240 + 3p = 300 - 3p

p = 60/6 = 10

and required quantity is 240 + 3*10 = 270 units.

Price is 10 and quantity is 270