Answer to Question #258567 in Microeconomics for sach

Question

Suppose for a commodity X, demand and supply curves

are given by the equations

(1)

Q d = 4 P

(2)

Q s = 2+P

(i) What is the equilibrium price?

(ii) What is the equilibrium quantity?

Answer 1

At equilibrium Qd = Qs

But,

• Qd = 4 P
• Qs = 2+P

Hence,

• 4P = 2+P
• 4P - p = 2
• 3P = 2
• P =2/3

Equilibrium price = $2/3 or $0.67

Substitute 2/3 into either the demand equation or supply equation to get the equilibrium quantity.

• Qd = 4P

But,

• P =2/3

Hence,

• Qd = 4(2/3)
• Qd = 2.67

Equilibrium quantity = 2.67 units