Answer:
Demand & supply are representative quantities , consumers & producers are willing and able to buy & sell respectively .
Demand Curve is downward sloping due to price - demand inverse relationship , Supply Curve is upward sloping due to price - demand direct relationship .
Equilibrium Price & Quantity : Where Demand = Supply .
Graphically , it is where both the curves intersect .
Given mathematical functions : Qd = a - bp , Qs = a + bp
[Qd , Qs = Quantity demanded , quantity supplied , p = price , b = responsiveness of Qd , Qs to price change (negative sign in demand & positive sign in supply , a = constant autonomous Qd , Qs values]
To find equilibrium , we will equate Qd & Qs , obtain equilibriu price & then find eqm quantities .
Exmpl : Qd = 10 - 2p , Qs = 12 - 4p
Equilibrium where Qd = Qs i.e 10 - 2p = 12 - 4p ∴ 12 - 10 = -2p + 4p ∴ 2 = 2p
Eqm Price p = 1 .
Putting this in Qd & Qs : Qd = 10-2(1) = 8 ; Qs = 12 - 4(1) = 8
