Question

After graduation, you accept a job with the Australian Environmental Protection Authority (AEPA). Your first task is to perform a cost-benefit analysis of a regulation to limit crocodile hide exports. You estimate that monthly demand for Australian crocodile hide exports is Q₀​=100−0.5P and that supply is Q₅​=P−50. What are the equilibrium (market clearing) price and quantity?

Answer 1

The equilibrium market clearing price for Australian crocodile hide exports is $100, and the equilibrium quantity is 50 units when demand and supply equations are set equal to each other and solved for the price and quantity.

Step-by-step explanation:

To find the equilibrium market clearing price and quantity for Australian crocodile hide exports, we need to solve for the price (P) and quantity (Q) where the demand equation and supply equation intersect. This means setting the demand equation equal to the supply equation and solving for P.

Demand equation: Q0​=100−0.5P

Supply equation: Q5​=P−50

Setting them equal to each other:

100−0.5P = P−50

By adding 0.5P to both sides and adding 50 to both sides, we get:

150 = 1.5P

Dividing both sides by 1.5, we find:

P = 100

Now, substituting P back into either equation, we choose the demand equation for simplicity:

Q0​=100−0.5(100)

Q0​=100−50

Q0​=50

Therefore, the equilibrium price is $100 and the equilibrium quantity is 50 units of crocodile hide exports.