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3 years ago

Find the equilibrium quantity and equilibrium price for the commodity whose supply and demand functions are given.

Business

1 answer:

Vlad1618 [11]3 years ago

3 0

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

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