Question

Find the equilibrium price and equilibrium quantity from the following relations describes demand and supply conditions...

Find the equilibrium price and equilibrium quantity from the following relations describes demand and supply conditions in a given industry.

QD = 80000 –20000P(Demand)

QS = -20000 + 20000P(Supply)

Where Q is quantity and P is price in dollars.

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Homework Answers

Answer #1

At equilibrium; Qd = Qs

=> 80000 - 20000P = -20000 + 20000P

=> 80000 + 20000 = 20000P + 20000P

=> 1,00,000 = 40,000P

=> P = (1,00,000 / 40,000)

=> P = 2.5

Equilibrium price is $2.5

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At equilibrium, Qd = Qs = Q

=> Q = 80000 - 20000P

=> Q = 80000 - 20000(2.5)

=> Q = 80,000 - 50,000

=> Q = 30,000

Equilibrium quantity is 30,000

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