Question

The President of a company that produces an electronic gadget and sells it in a competitive market observed that the demand for the product is represented by a linear equation of the form P = 10 - .2Qd and the supply by P = .2Qs. He asked the Vice President for Marketing what P and Q will be at equilibrium?

Answer 1

Answer and Explanation:

The computation is shown below:

Demand is

P = 10 - 0.2Qd

And

supply is

P = 0.2QS

Now as we know that

Equilibrium would be

Qd = Qs = Q

So

10-0.2Q = 0.2Q

0.4Q = 10

Q = 25 units is the equilibrium quantity

and P = 0.2Q

= 0.2 × 25

= $5 is the equilibrium price