Question

Given the following market function, find the equilibrium price and quantity:

 [6 marks]

Qd = 54 – 4p

Qs = 4 + 4p

Answer 1

At equilibrium,

$Q_d=Q_s$

$54-4p=4+4p$

$54-4=4p+4p$

$50=8p$

$P=6.25$

$Q_d=54-4p=54-4(6.25)=29.$

$\therefore$ Equilibrium price and quantity are 6.25 and 29 respectively.