Question

Suppose the demand and supply functions of commodity X are given by, Qd = 500 + 3P and Qs = 700 – P Qd = 500 + 3P Qs = 700 – P Find out the equilibrium price and quantity demanded and supplied.

Answer 1

Equilibrium price and quantity can be determined by equating the demand and supply functions Qd = Qs

500 + 3P = 700 – P 

4P = 200

P = \(\frac{200}{4}\) = 50

Equilibrium price is ₹50. Applying the price in the demand function, we get 

500 + 3 × 50 

500 + 150 =650 

Therefore, equilibrium price is ₹50 and quantity is 650.

Qd = Qs 

500 + 3P = 700 – P 

4P = 200 

\(P = \frac{200}{4} = 50\)

Qd = 500 + 3 × 50 

= 500 + 150 = 650