Answer to Question #276709 in Microeconomics for cyah

Question

Suppose there are 100 identical self-service gasoline stations in the city selling the same types of gasoline. Total market demand (Q_D) and total market supply (Qs) functions for gasoline in the market are as follows:

Q_D = 60,000 – 25,000P

Qs= 25,000P

where P is expressed in $ per litre.

 

Based on the given information, calculate the equilibrium price and quantity of gasoline in the market. 

Answer 1

At equilibrium Qd$=$ Qs

$60,000-25,000P=25,000P$

$60,000=50,000P$

$P=1.2$

Substituting for P:

$Qd=60,000-25,000(1.2)$$=30,000$

At equilibrium

Price$=$ $1.2 per litre

Quantity$=$ 30,000