Question

Suppose the market for agrochemicals has a supply

Sx=30+A and the demand curve of Dq=240-2q assume that the market is perfectly competitive what would the equilibrium price and quantity be?

Answer 1

Solution:

At equilibrium: Dq = Sx

240 – 2q = 30 + A

240 – 30 = A + 2q

210 = A + 2q

Divide both sides by 2:

105 = $\frac{A}{2}$ + q

q = 105 – $\frac{A}{2}$

Equilibrium quantity = 105 – $\frac{A}{2}$

Substitute in the supply function:

Sx = 30 + A

Sx = 30 + (105 – $\frac{A}{2}$)

A = 270 – 2S

Equilibrium price = 270 – 2S