Answer to Question #142327 in Finance for Mr. Dinesh Pal Singh

Question

13. Suppose that the demand and supply equations have been estimated and that the demand and supply curves are given by Qd = 14 - 2P & Qs = 2+ 4P; Determine the equilibrium price and quantity

Answer 1

$\bold {Answers}$

Equilibrium quantity, $Q_{e}=$ $10 \space units$

Equilibrium price, $P_{e}=$ $\$2$

$\bold {Solutions}$

Market equilibrium is achieved when demand equals supply, that is when

$Qd = Qs$

$=> 14-2P = 2 + 4P$

$=> 14-2 = 4P + 2P$

$12 = 6P$

$\dfrac {6P}{6}=\dfrac {12}{6}$

$\bold {P = \$2}$

When $P = \$2, \space Qd = Qs$

$=> Q =14-2(2)$

$Q = 14-4$

$\bold {Q = 10 \space units}$

$\therefore$ the equilibrium price is $\$2$ and the equilibrium quantity is $10 \space units$