Question

1. Consider the market for compact discs. Suppose the following are the demand and supply

functions for compact discs.
Qa= 150 - 5P
Qs = 17 + 2P
a. Calculate the equilibrium price and equilibrium quantity.
b. What would happen if compact disc sellers priced compact discs at $20.00 per CD?

Answer 1

a. The equilibrium price is $19 and the equilibrium quantity is 55 units.

b. The quantity will be 50 units at $20 price.

Step-by-step explanation:

Given the demand function, Qa= 150 - 5P

The supply function, Qs = 17 + 2P

At the equilibrium point, the demand is equal to supply.

Demand = Supply

Qa = Qs

150 – 5P = 17 + 2P

150 – 17 = 2P+5P

133 = 7P

P = 19

Now insert P = 19 in Qa= 150 - 5P

Qa= 150 – 5(19)

Qa = 55

The equilibrium price is $19 and the equilibrium quantity is 55 units.

b. If the price is $20 then the quantity will be:

Qa= 150 - 5P

Qa= 150 – 5(20)

Qa = 50 units

The quantity will be 50 units at $20 price.