Answer to Question #146253 in Economics of Enterprise for Syed Qasim

Question

If demand and supply function are given as:
Qd= 65 – 10P Qs= -35 + 15P
a. Find the equilibrium price and quantity and show it on labeled D/S diagram.

Answer 1

$\bold {Answers}$

$P_e = Rs. 4$

$Q_e = 25 \space units$

$\bold {Solutions}$

Market equilibrium is attained when

$Qd = Qs.$

$=> 65 - 10P = -35 + 15 P$

$=> 65 + 35 = 10P + 15P$

$=> 100 = 25P$

$=> \dfrac {100}{25} = \dfrac {25P}{25}$

$=> \bold {P = Rs. 4}$

When $P = 4,$ $Qd = Qs = 65 - 10 (4)$

$= 65 - 40$

$\bold {= 25 \space units }$

$\therefore \space Pe = Rs. 4 \space and \space Qe = 25 \space units$

The equilibrium condition is illustrated on the graph below