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Determining equilibrium quantity and price

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The demand and supply functions are given below.

QD = 500 - 2P

QS = -100 + 3P

Graph the supply and demand curves using Excel.

Find the equilibrium price and quantity.

If the current price of the product is $100, what is the quantity supplied and quantity demanded? How would you describe this situation? What would you expect to happen in this market (will the price go up or down)?

If the current price of the product is $150, what is the quantity supplied and quantity demanded? How would you describe this situation? What would you expect to happen in this market (will the price go up or down)?

Suppose that the demand changes to QD = 600-2P and the supply function stays the same. Graph the new situation in Excel. Find the new equilibrium price and quantity, and show it on your graph.

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Solution Summary

This solution describes the steps to determine equilibrium quantity and price for given demand and supply functions. Equilibrium is calculated algebraically and graphically. It also determines the market behavior at given market prices.

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Solution:

Graph the supply and demand curves using Excel.

By using given demand and supply functions, following table can be generated
(See into cells for formulas)

P Qs=-100+3P Qd=500-2P
100 200 300
110 230 280
120 260 260
130 290 240
140 320 220

Find the equilibrium price and quantity

For equilibrium ...

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Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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