Calculating equilibrium - example
Assume a linear demand function of the form:
Qd = 85 - 5P
and a linear supply curve of the form:
Qs = -20 + 10P
Using these demand and supply functions, answer the following questions. Once you have had a go at the questions, follow the link below to compare your answers.
- Calculate the quantities demanded and supplied for prices from $2 - $12.
- Plot these figures to give the demand and supply curves for the product.
- Using simultaneous equations, calculate the equilibrium price and output.
- If the demand function changes to Qd = 100 - 5P, draw up a new table to show the change in quantity demanded for prices from $2 - $12.
- Plot the new demand curve on the original demand and supply diagram.
- Using simultaneous equations calculate the new equilibrium price and quantity.