Question:
Market demand and supply curves for a certain consumer good is represented by the following equations: Demand ($Q_D$) = 80 – 2P, Supply ($Q_S$) = -20 + 3P. Then the equilibrium quantity and price would be:
(1) 40 units and Rs. 20.
(2) 56 units and Rs. 12.
(3) 50 units and Rs. 15.
(4) 60 units and Rs. 10.
(5) 40 units and Rs. 120.
Correct Answer:
(1)
Answer Explanation:
Set $Q_D = Q_S$ to find the equilibrium price: $80 – 2P = -20 + 3P$. Add 2P to both sides: $80 = -20 + 5P$. Add 20 to both sides: $100 = 5P rightarrow P = 20$. Substitute P back into either equation to find Quantity: $Q_D = 80 – 2(20) = 80 – 40 = 40$.
Topic: Market Equilibrium Year: 2017
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