Question

Assume that demand for a commodity is represented by the
equation *P* = 10 - 0.2*Q* and supply by the equation
*P* = 2 + 0.2*Q*. Find equilibrium price and quantity
(algebraically). Then graph the supply and demand lines, plot
equilibrium point and label axes, equilibrium P* and Q*, vertical
and horizontal intercepts for demand curve, and vertical intercept
for the supply curve.

Answer #1

In equilibrium, Demand price equals supply price.

10 - 0.2Q = 2 + 0.2Q

0.4Q = 8

Q = 20

P = 10 - (0.2 x 20) = 10 - 4 = 6

From demand function,

When Q = 0, P = 10 (Vertical intercept) & When P = 0, Q = 10/0.2 = 50 (Horizontal intercept)

From supply function,

When Q = 0, P = 2 (Vertical intercept)

In following graph, Price (P) & Quantity (Q) are measured vertically & horizontally. AB & CD are demand & supply curves intersecting at point E with price P* (= 6) and quantity Q* (= 20).

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respectively, and P is the Price. Use the equilibrium condition Qs
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1: Solve the equations to determine equilibrium price.
2: Now determine equilibrium quantity.
3: Graph the two equations to substantiate your answers and
label these two graphs...

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equation P = 20 – 0.6 Q d, and supply by the equation P = 10 + 0.2
Qs where Qd and Q s are quantity demanded and quantity supplied,
respectively, and P is the Price. Use the equilibrium condition Qs
= Qd
1: Solve the equations to determine equilibrium price.
2: Now determine equilibrium quantity.
3: Graph the two equations to substantiate your answers and
label these two graphs...

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P = 10 - 0.2Qd
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respectively ,and P is
price. Using the equilibrium condition Qs = Qd, solve the equations
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