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 $10 \space units$