Question

Consider the perfectly competitive market for gasoline. The demand for gasoline is Q=100−P while the supply is where Q and P is the quantity (thousand barrels per day) and price ( A$/ per barrel), respectively. a) Calculate the equilibrium price and quantity.

Answer 1

The equilibrium price and quantity in a perfectly competitive market can be found by equating the quantity demanded with the quantity supplied. In this case, the equilibrium price is 50 A$/per barrel and the equilibrium quantity is 50 thousand barrels per day.

Step-by-step explanation:

The equilibrium price and quantity of gasoline in this perfectly competitive market can be found by equating the quantity demanded with the quantity supplied. The demand equation is given as Q = 100 - P, where Q is the quantity (thousand barrels per day) and P is the price (A$/per barrel) of gasoline. The supply equation is Q = P. By setting Q = 100 - P equal to Q = P and solving for P, we can find the equilibrium price. Similarly, by substituting the equilibrium price into either the demand or supply equation, we can find the equilibrium quantity.

In this case, when we substitute the equilibrium price into the demand equation, we get 100 - P = P. Solving for P, we find P = 50. Substituting this value into the supply equation, we get Q = 50. Therefore, the equilibrium price is 50 A$/per barrel and the equilibrium quantity is 50 thousand barrels per day.