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Calculating equilibrium price and quantity

Given the following demand and supply equations:

Demand: Q=100 - 5P
Supply: Q=20P

1. What is the equilibrium price?

2. What is the equilibrium quantity?

3. Using Excel and prices in the range of $1 to $10, generate the demand and supply schedules for the initial equations.

4. Use Excel to plot a graph of your demand and supply curves that include the equilibrium point.

5. What are the new equilibrium price and quantity if supply remains constant and demand increases so that the new demand equation is: Q = 150 - 5P?

6. What are the new equilibrium price and quantity if demand remains contant and supply decreases so that the new supply equation is Q = 2P?

Solution Preview

Please refer attached file for graph.

1. What is the equilibrium price?

For determining equilibrium price, put Q (demand)=Q(supply)
100-5P=20P
100=25P
P=4
Equilibrium price is $4.

2. What is the equilibrium quantity?
Quantity demanded at equilibrium price (i.e. P=$4)=100-5*4=80
Quantity supplied at equilibrium price (i.e. P=$4)=20*4=80
Equilibrium quantity is 80 units.

3.Using Excel and prices in the range of $1 to $10, ...

Solution Summary

Solution describes the steps to calculate equilibrium price and quantity in the given cases.

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