Assume that the supply and demand functions for a commodity are as follows: Supply: q = 200p; Demand: q = 4,200 - 400p.
Find the equilibrium price and the corresponding equilibrium quantity.
A) The equilibrium price is $8 when equilibrium quantity is 1,400 items.
B) The equilibrium price is $7 when equilibrium quantity is 1,300 items.
C) The equilibrium price is $7 when equilibrium quantity is 1,400 items.
D) The equilibrium price is $7 when equilibrium quantity is 1,600 items.
E) The equilibrium price is $6 when equilibrium quantity is 2,400 items.

Question

Quizplus · Accepted Answer

To find the equilibrium price and quantity, we need to set the supply and demand functions equal to each other and solve for p and q:

200p = 4,200 - 400p
600p = 4,200
p = 7

Now that we know the equilibrium price is $7, we can use either the supply or demand functions to find the equilibrium quantity:

q = 4,200 - 400(7)
q = 1,400

Therefore, the equilibrium price is $7 and the equilibrium quantity is 1,400 items, which corresponds to choice C.

Assume That the Supply and Demand Functions for a Commodity