Question

The demand function for Widgets is given by the equation P = 14 – 0.39Q, and the supply function is

given by the equation P = 0.61Q + 12. Find the market equilibrium price for Widgets.

Answer 1

Equilibrium price for widgets = 13.22

Explanation:

At equilibrium, quantity demand, Qd = quantity supplied, Qs

Demand

P = 14 – 0.39Q

P - 14 = - 0.39Q

Q = (P - 14) / - 0.39

Supply

P = 0.61Q + 12

P - 12 = 0.61Q

Q = (P - 12) / 0.61

Qd = Qs

(P - 14) / - 0.39 = (P - 12) / 0.61

Cross product

(P - 14) * 0.61 = - 0.39 * (P - 12)

0.61P - 8.54 = - 0.39P + 4.68

0.61P + 0.39P = 4.68 + 8.54

P = 13.22

Check

Q = (P - 14) / - 0.39

= (13.22 - 14) / - 0.39

= -0.78 / -0.39

= 2

Q = (P - 12) / 0.61

= (13.22 - 12) / 0.61

= 1.22 / 0.61

= 2

Therefore,

Equilibrium price for widgets = 13.22

Equilibrium quantity = 2