A good’s Demand Curve is QD = 25 – P, and its Supply Curve is QS = 10 + 2P.

Question:

A good’s Demand Curve is QD = 25 – P, and its Supply Curve is QS = 10 + 2P.

a. When P = $20, what is the difference, if any, between QD and QS?
b. When P = $3, what is the difference, if any, between QD and QS?
c. What are the equilibrium values of P and Q?

Answer:

a. When P = 20
QD = 25 – P
25 – 20= 5

QS = 10 + 2P
= 10 + 2 * 20 = 50

QS – QD = 50 – 5 = 45

b. When P = 3
QD = 25 – 3= 22
QS = 10 + 2P
= 10 + 2*3= 16
QD – QS = 22- 16= 6

c. At equilibrium, QD – QS
25- P= 10 + 2P
15= 3P
P = 5

Q =25- 5=20, Q=20

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.