Question

Suppose the demand and supply curves of salt are given by:

Qd = 1000 - p
Qs = 700 + 2p

Find the equilibrium price and quantity.

Answer 1

The equilibrium price of salt is $100, and the equilibrium quantity is 900 units. This is determined by setting the demand and supply equations for salt equal to each other and solving for P.

Step-by-step explanation:

To find the equilibrium price and quantity where the demand and supply for salt are equal, we need to solve the equations given for Qd (demand) and Qs (supply) by setting them equal to each other.

Given:

• Qd = 1000 - P
• Qs = 700 + 2P

At equilibrium, Qd = Qs, so:

1000 - P = 700 + 2P

Add P to both sides:

1000 = 700 + 3P

Subtract 700 from both sides:

300 = 3P

Divide by 3:

P = 100

Now that we have the equilibrium price, we can find the equilibrium quantity by substituting P back into either the Qd or Qs equation:

Qd = 1000 - 100 = 900

So, the equilibrium price is $100 and the equilibrium quantity is 900 units of salt. This is confirmed when both demand and supply quantities are equal, indicating that the market has reached equilibrium.