Answer to Question #55275 in Finance for Saurabh Mishra

Question

Q2.
A) Determine the market equilibrium price if the demand and supply function is given as
D-12p+8
S-14p-4
Where D-demand
S-supply
P-price
B) Determine the equilibrium quantity if price is the same as above
D-4p-4q
S-8q-4p
Where D-demand
S-supply
P-price
Q-quantity

Answer 1

a) D = 12p + 8
S = 14p – 4
Equilibrium price is in the point, where Qd = Qs, so:
12p + 8 = 14p - 4
p = $6
b) The equilibrium quantity is in the point, where Qd = Qs, so if p = 6, then:
D = 4p – 4q
S = 8q – 4p
24 - 4q = 8q - 24
q = 4 units.