Linear Supply & Demand Functions and Equilibrium Point a) A company is willing to supply 120 clocks at a p

4. Linear Supply & Demand Functions and Equilibrium Point

a) A company is willing to supply 120 clocks at a price of $80 each, but only 80 clocks at a price of $40 each. What is the Supply Function (price as a function of quantity)?

b) Consumers will buy 150 clocks at a price of $40 each, but only 50 clocks at a price of $80. What is the Demand Function (price as a function of quantity)?

c) What is the equilibrium quantity?

d) What is the equilibrium price?

 

 

 

answer:

a) (120,80) and (80,40)

p-80 = (40-80)/(80-120) (q-120)

p-80 = 1(q-120)

p= q-40 : Supply equation

b) (150,40) and (50,80)

p – 40 = (80-40)/(50-150) (q-150)

p-40 = -2/5 (q-150)

5p – 200 = -2q + 300

p = -2q/5 +100 : demand function

c) Demand = supply

-2q/5 +100 = q – 40

140 = 7q/5

q = 100

Equilibrium quantity = 100 units

d) p= q – 40 = 100 – 40 = 60

Equilibrium price is $60

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