Question

What is equilibrium? Suppose, demand function for Singara is QD = 50 – 2P and supply
function is QS= 20 + 3P. Find out -
(i) The equilibrium price and quantity of Singara.
(ii) If the supply increases to QS = 30+3P, what will happen to the equilibrium
price and quantity?
(iii) If government imposes a price ceiling at Tk. 3, what will happen to the market?

Answer 1

i)At equilibrium price quantity demanded =quantity supplied

$$50-2p=20+3p$$

$$5p=30$$ $$p=Tk.6$$

Equilibrium quantity=

$$50-2\times6=38$$

ii)

$$50-2p=30+3p$$

$$20=5p,p=Tk.4$$

Equilibrium quantity =

$$50-2\times4=42$$

Equilibrium price falls to Tk. 4 while equilibrium quantity increases to 42

iii)Quantity demanded is

$$50-2\times3=44$$

Quantity supplied is

$$20+3\times3=29$$

The price ceiling will create a shortage of 15 units in the market