How do you find the equilibrium price & level of output give
Demand Data: P & Quantity Demanded
Cost Data: Output & Total cost
To find the equilibrium price and level of output, you will need to use the demand data and cost data to determine the point at which the quantity demanded equals the quantity supplied.
Here's a step-by-step process to find the equilibrium price and level of output:
1. Plot the demand data: Start by creating a graph with the price (P) on the y-axis and the quantity demanded on the x-axis. Use the demand data points to plot the demand curve. The demand curve shows how the price of a product affects the quantity demanded.
2. Plot the cost data: Create another graph with the output on the x-axis and the total cost on the y-axis. Use the cost data points to plot the total cost curve. The total cost curve illustrates how the level of output affects the total cost of production.
3. Find the point of intersection: Look for the point where the demand curve and the total cost curve intersect. This point represents the equilibrium price and level of output. It is the point at which the quantity demanded matches the quantity supplied, resulting in market equilibrium.
4. Determine the equilibrium price: From the point of intersection, draw a horizontal line to the y-axis (price axis). This line will intersect with the price axis at the equilibrium price.
5. Determine the equilibrium level of output: From the point of intersection, draw a vertical line to the x-axis (quantity axis). This line will intersect with the quantity axis at the equilibrium level of output.
By following these steps and analyzing the graphs, you can find the equilibrium price and level of output given demand data and cost data.