Question

3. The demand for cookies is given by P = 36.2 – 0.2QD where QD is the quantity demanded of the cookies (number of cookies per day) and P is the price of cookies ($/cookie). Also, the supply of cookies is given by P = 1.4 + 0.3QS where QS is the quantity supplied of the cookies (number of cookies per day) and P is the price of cookies ($/cookie).

Find the equilibrium price and quantity. Show your work. (2)

Answer 1

At equilibrium, quantity demanded $($$QD)$ = quantity supplied $(QS)$

$36.2 - 0.2Q = 1.4 + 0.3Q$

$36.2 - 1.4 = 0.3Q + 0.2Q$

$34.8 = 0.5Q$

$Q = \frac{34.8}{0.5} = 69.6$ cookies per day (equilibrium quantity)

$P = 36.2 - 0.2(69.6) = \$22.28$

per cookies which is the equilibrium price