Question

a) Suppose the market demand curve for a product is given by 𝑄

𝑑 = 1000 − 10𝑃 and the market supply curve is given by 𝑄𝑠 = −50 + 25𝑃.

i. What are the equilibrium price and quantity [3Marks]

ii. What is the inverse form of the demand curve [2 Marks]

Answer 1

i. The equilibrium price and quantity are:

Qd = Qs,

1000 − 10P = −50 + 25P,

35P = 150,

P = 4.29,

Q = 1000 - 10×4.29 = 957.14 units.

ii. The inverse form of the demand curve is:

P = 100 - 0.1Q.