Question

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. If demand changes from P = 10 - .2Q to P = 7 - .3Q, the new equilibrium quantity is

Answer 1

Answer:

Q = 10

Explanation:

Assuming that supply remains the same, the new supply and demand equations are, respectively:

$P_S = 2 + 0.2Q\\P_D = 7 - 0.3Q$

The equilibrium quantity occurs at the point for which the prices in the supply and demand equations are the same:

$2 + 0.2Q = 7 - 0.3Q\\0.5Q=5\\Q=10$

The new equilibrium quantity is Q = 10.