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I need help understanding the formula for this question.

I need help understanding the formula for this question.-example-1
User Kabir
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1 Answer

2 votes

Answer:

$80

Explanation:

You are being asked to find a value for price (x) that makes the quantity (y) in each equation be the same:

y (for manufacturer) = y (for retailer)

25x -600 = -5x +1800 . . . . . substitute the given expressions for y

30x = 2400 . . . . . . . . . . . add 5x+600 to both sides

x = 80 . . . . . . . . . . . . . . . . divide by 30

The equilibrium price is $80.

__

Check

The manufacturer is willing to sell 25(80) -600 = 1400 phones at that price. The retailer is willing to buy -5(80)+1800 = 1400 phones at that price. These quantities are the same, hence $80 is the equilibrium price.

_____

Apparently, you are expected to graph the supply curve and the demand curve. Conveniently, they are straight lines. The point where they intersect is the point where manufacturer and retailer can agree on price and quantity. This is the "equilibrium point."

I need help understanding the formula for this question.-example-1
User MoLowKey
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