Question

A graph has quantity on the x-axis and price on the y-axis. The supply line goes through (60, 65), (75, 70), (100, 95). The demand line goes through (60, 100), (75, 70), and (80, 60). Using the above supply/demand graph, what is the price at the point of equilibrium? a. 100 b. 75 c. 70 d. 5

Answer 1

C. 70

Explanation:

The point of equilibrium occurs where the supply and demand lines intersect. To find this point, we can set the equations for supply and demand equal to each other and solve for the price:

Supply: y = mx + b, where m is the slope and b is the y-intercept

m = (70 - 65) / (75 - 60) = 0.5

y = 0.5x + 32.5

Demand: y = mx + b

m = (60 - 100) / (80 - 60) = -2

y = -2x + 220

Setting these equations equal to each other, we get:

0.5x + 32.5 = -2x + 220

Solving for x, we get:

2.5x = 187.5

x = 75

So the point of equilibrium occurs at a quantity of 75, and the price at this point is given by either the supply or demand equation evaluated at x=75:

Supply: y = 0.5(75) + 32.5 = 70

Demand: y = -2(75) + 220 = 70

Therefore, the price at the point of equilibrium is $70. Answer choice (c) is correct.