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Finding equilibrium quantity and price

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1) If the market demand and supply functions for pizza in Newtown were
QD = 12,000 - 1,000P
QS = -4,000 + 1,000P

Find the equilibrium quantity and price.

2) Starting with the demand and supplies functions from problem #1, Determine algebraically the new equilibrium price and quantity if

(a) the demand function changes from QD=12,000-1,000P to QD"= 8,000- 1,000, or
(b) the market supply function changes from QS= -4,000 + 1,000P to QS** = 1,000P.

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Solution Summary

Solution describes the steps to find out equilibrium price and quantity for Pizza. It also analyzes the effect of change in demand and supply on new equilibrium values.

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Solution:

QD=12000-1000P
Qs=-4000+1000P
For equilibrium QD=Qs
12000-1000P=-4000+1000P
2000P=16000
P=8
Qs=-4000+1000*8=4000
QD'=12000-1000*8=4000
Equilibrium Price=8
Equilibrium ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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