Question

Suppose demand and supply are given by qxd = 14 - (1/2)px and qxs = (1/4)px - 1 instructions: round your answers to the nearest whole number.
a. determine the equilibrium price and quantity. show the equilibrium graphically. equilibrium price: $ equilibrium quantity:

Answer 1

Answer: Price - $20 , Quantity = 4 units

Explanation: Equilibrium in a goods market occurs when demand for a good is equal to its supply. It is given by,

$Q_{xd}=Q_{xs}$

where,

$Qx_{xd} = 14 - \frac{1}{2}P_{x} Qx_{xs} = \frac{1}{4} P_{x} - 1$

So, we have

$14 - \frac{1}{2}P_{x} = \frac{1}{4} P_{x} - 1$  15 = \frac{3}{4} Px_{x}   60 = 3 P_{x}   20= P_{x}[/tex]

Equilibrium price is $20.

Equilibrium quantity is $Q= 14 - \frac{1}{2} P_{x} Q= 14 - 10 Q= 4$

Equilibrium quantity is 4 units.