Question

6. Suppose that demand and supply of Oragnges are described by the following equations: P = 200-6Q (demand) P = 40 +2Q (supply) a) Calculate the equilibrium price and quantity. Illustrate.​

Answer 1

Answer: Equilibrium price is P = 80 and the equilibrium quantity is Q = 20

Step-by-step explanation:

To calculate the equilibrium price and quantity, we can follow these steps:

Set the demand equation equal to the supply equation:

200 - 6Q = 40 + 2Q

Simplify by adding 6Q to both sides and subtracting 40 from both sides:

160 = 8Q

Solve for Q by dividing both sides by 8:

Q = 20

Substitute Q = 20 into either the demand or supply equation to find the equilibrium price:

P = 200 - 6(20) = 80

or

P = 40 + 2(20) = 80

So the equilibrium price is P = 80 and the equilibrium quantity is Q = 20.

To illustrate this on a graph, we can plot the demand and supply curves on the same graph and look for the point where they intersect. The vertical axis represents price (P) and the horizontal axis represents quantity (Q). At the point where the demand and supply curves intersect, we have the equilibrium price and quantity.