6. Suppose demand and supply are given by Qd = 60 - P and Qs = P - 20.
a. What are the equilibrium quantity and price in this market? (4 points)
I know we make them : 60 - P = P - 20
now Im stuck
You should re-frame the question as 0=60-P-P+20. Solve for P gives you 40, which is the equilibrium price.
To find the equilibrium quantity and price in this market, you need to solve the equation setting the quantity demanded equal to the quantity supplied. Let's proceed with the solution:
1. Start by setting the quantity demanded (Qd) equal to the quantity supplied (Qs):
Qd = Qs
2. Replace Qd with its equation:
60 - P = Qs
3. Replace Qs with its equation:
60 - P = P - 20
4. Simplify the equation:
Combine like terms:
60 - P + P = P - P - 20 + P
60 = 2P - 20
5. Solve for P:
Move the constant to the other side:
60 + 20 = 2P - 20 + 20
80 = 2P
Divide by 2:
80/2 = 2P/2
40 = P
So, the equilibrium price in this market is P = 40.
6. Find the equilibrium quantity:
Now, substitute the equilibrium price (P = 40) into either the demand or supply equation:
Qd = 60 - P
Qd = 60 - 40
Qd = 20
Therefore, the equilibrium quantity in this market is Q = 20.
To summarize:
The equilibrium quantity is Q = 20, and the equilibrium price is P = 40.
Just solve the equation for P
You should be able to do that in your head.