Question

7. Consider the following Demand-Supply Equations

Qd =30-2P

Qs =6+2P

i) What is equilibrium?

ii) Find the equilibrium price and quantity. Also draw the graph.

Answer 1

1. Economic equilibrium is a condition or state in which economic forces are balanced.
2. Given that Qd=30-2P and Qs=6+2P

$E=Q_d=Q_s$

$30-2P=6+2P$

$4P=24$

$P^*=6$

$Q^*=6+2(6)=18$

Equilibrium price and quantity is 6 and 18 respectively.