Answer to Question #202833 in Macroeconomics for Ayanda

Question

Given the demand for a product as qd=100-5p the supply is given as qs=-20+3p. You are told equilibrium is obtained at the point where qd=qs. The equilibrium quantity for product is?

Answer 1

Solution:

At equilibrium: Quantity demanded (Q_d) = Quantity supplied (Q_s)

Quantity demanded = 100 – 5p

Quantity supplied = -20 + 3p

Therefore:

100 – 5p = -20 + 3p

100 + 20 = 3p + 5p

120 = 8p

P = $\frac{120}{8} = 15$

Equilibrium price (p) = 15

Substitute in the demand or supply function to derive equilibrium quantity:

100 – 5p

100 – 5(15) = 100 – 75 = 25

Equilibrium quantity of the product (q)= 25