Final answer:
The equilibrium quantity before the tax is determined by setting the quantity demanded equal to the quantity supplied and solving for the price P. After finding the equilibrium price to be 40, we substitute it back into the supply function to find that the equilibrium quantity is 40 units.
Step-by-step explanation:
To determine the equilibrium quantity before the tax, we need to set the quantity demanded (Qd) equal to the quantity supplied (Qs). The provided demand function is Qd = 240 - 5P, and the supply function is Qs = P. By setting Qd = Qs, we are looking for the price (P) at which the quantity demanded by consumers equals the quantity supplied by producers.
The equations provided seem to have an error, but following the correct approach we can set them equal to each other and solve for P:
- Qd = Qs
- 240 - 5P = P
- 240 = 5P + P
- 240 = 6P
- P = 240 / 6
- P = 40
Now that we have found the equilibrium price (P), we can substitute it into either the demand or the supply function to find the equilibrium quantity. Let's substitute it into the supply function:
The equilibrium quantity is therefore 40 units before the tax is applied.