Question

Qd = 15,000 -500P

Qs = -8000 +300P

Solve for equilibrium price and quantity. (At equilibrium unity supplied equals quantity demanded)

Note: When I solve this and put the "price equilibrium" price back in each equation, my final number is off by 5. I should be able to put the Pe answer back into either equations and get the same answer. What am I doing wrong?   

Answer 1

To find equilibrium price and quantity, we have to keep quantity demand and quantity supply equivalent to each other.

Qd = Qs

15,000 - 500.P = -8,000 + 300.P

15,000 + 8,000 = 500.P + 300.P

23,000 = 800.P

P = $28.75

Putting this price in the above given equations, we can find quantity:

Quantity demand = 15,000 - 500.P = 15,000 - 500 * 28.75 = 15,000 - 14,375

Quantity demand = 625

Quantity supply = -8,000 + 300.P = -8,000 + 300 * 28.75 = -8,000 + 8,625 = 625

Quantity Supply = 625

Therefore, we can say that the market is in equilibrium at price $28.75 and equilibrium quantity is 625 as both demand and supply are equal to each other at this point.