Find the equilibrium price and equilibrium quantity by solving the system of two equations algebraically (note: the terms, a, b, c, d represent any constant numbers) (2 points): Demand (Q) = a – bP Supply (Q) = –c + dP

Find the equilibrium price and equilibrium quantity by solving the system of two equations algebraically (note: the terms, a, b, c, d represent any constant numbers) (2 points):

Demand (Q) = a – bP

Supply (Q) = –c + dP

 

 

Answer:

Demand and supply equilibrates to determine price and quantity. See that we have Demand (Q) = a – bP and Supply (Q) = –c + dP. Equate them to determine price P*

a – bP* = -c + dP*

a + c = dP* + bP*

P* = (a + c)/(d + b)……………….. This is the equilibrium price

Now for the equilibrium quantity, use any of the demand or supply equation

Demand (Q) = a – b*(a + c)/(d + b)

Q = (ad + ab – ab – ac)/(d + b)

Q* = a(d – c)/(d + b)

Asked on February 14, 2018 in economics.
Add Comment
0 Answer(s)
  • Votes
  • Oldest

Your Answer

By posting your answer, you agree to the privacy policy and terms of service.