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23 March, 10:14

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

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  1. 23 March, 12:19
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    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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