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Market Equilibrium

Market Equilibrium (example question)

The following relationships describe monthly demand and supply conditions in the metropolitan area for recyclable aluminum:

QD = 317,500 - 10,000P (Demand)

QS = 2,500 + 7,500P (Supply)

Where Q is quantity measured in pounds of aluminum scrap metal, and P is the price in cents per pound. Complete the following table:

Price Quantity Supply Quantity Demand Surplus (+) / Shortage (-)

15 ¢ 115,000 __________ ___________

16 ¢ __________ 157,500 ___________

17 ¢ __________ __________ ___________

18 ¢ __________ __________ ___________

19 ¢ __________ __________ ___________

20 ¢ __________ __________ ___________

At what price is this market in equilibrium?

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Solution Preview

Solving this problem is relatively simple. For each price, simply plug in the price into each formula and solve them. This will give you the quantities demanded and supplied, and the difference will be a surplus or shortage.
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<br>For example, at 15cents, we already know that the supplied is 115,000. This can be found by inserting 15 into the ...

Solution Summary

At what price is this market in equilibrium?

$2.19