# equilibrium

Suppose that the demand for video rentals per week is given by Qd^videos = 18 - 4P^videos, and the supply of videos by your local video store per week is Qs^videos = 6 + 2P^videos.

a) Calculate the equilibrium price and quantity in this market.

b) If the price = $3, then what is happening in this market? Briefly explain.

c) If the price = $0.50, then what is happening in this market? Briefly explain.

d) If the demand function changes to Qdvideos = 26 - 6Pvideos, given the original supply function, what is the new equilibrium price and quantity?

Please show work

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#### Solution Preview

The demand function is given as

QD = 18 - 4P

The supply function is

QS = 6 + 2P

a. To find the equilibrium all we need to do is solve the given set of equations, that is put QD = QS and solve for P. This gives

QD = QS

or 18 - 4P = 6 + 2P

or 12 = 6P

or 2 = P

Now plug this into either of the two equations ...

#### Solution Summary

The new equilibrium price is attained.