Question

The demand curve for hats are P = 75 – 6Qd and the supply curve for hats are P = 35 + 2Qs. What is the equilibrium price of a hat?

Answer 1

Equilibrium is achieved where demand and supply both are equal.

We have demand function and supply function, so we can find the equilibrium quantity and price by equating both the functions.

Demand Function

P = 75 – 6Q

Supply Function

P = 35 + 2Q

Equating both the demand and supply

75 – 6Q = 35 + 2Q

75 - 35 = 6Q + 2Q

40 = 8Q

Q = 5

Hence the equilibrium quantity is 5 units

To find the equilibrium price we can use this equilibrium quantity in any of the above functions.

P = 35 + 2Q

P = 35 + 2(5)

P = 35 + 10

P = 45

Hence the equilibrium price $45