Answer to Question #139842 in Microeconomics for Max jain

Question #139842
Suppose the demand equation for computers by Teetan Ltd for the year 2017 is given by Qd= 1200-P and the supply equation is given by Qs= 120+3P. Find equilibrium price and analyse what would be the excess demand or supply if price changes to Rs 400 and Rs 120.
1
Expert's answer
2020-10-25T19:04:17-0400

At equilibrium price, the quantity demanded is equals to the quantity supplied to the market.

This implies that Demand=Supply,

"Qd=Qs"


"1200-P = 120+3P"

Solving the above

"4P = 1080"

Hence Equilibrium price

"P = Rs 270"


When price Rises to Rs 400

"Qs = 120 + (3 \\times400)"

"Qs = 1320"

and

"Qd = 1200 - 400 = 800"

From the above price Rd 400, we can say that There is more supply than Demand because the price is high.


When Price rises to Rs 120

"Qs = 120 + (3 \\times120)"

"Qs = Rs 480"

And

"Qd = 1200 - 120 = Rs 1080"


The above price change implies that there is more demand than supply as the price is low.


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