Suppose that the market for cigarettes is initially in equilibrium and is perfectly competitive. The demand curve can be expressed as $P = 60 - Q ^ { d }$; the supply curve can be expressed as $P =$ $0.5 Q ^ { s }$. Quantity is expressed in millions of boxes per month. What are the amount traded and the price for this market?
A) $Q = 40 ; P = 20$
B) $Q = 20 ; P = 40$
C) $Q = 30 ; P = 30$
D) $Q = 30 ; P = 15$

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the equilibrium price and quantity are determined by the intersection of the demand and supply curves. Setting the demand and supply curves equal to each other, we get:$60 - Q ^ { d } = 0.5 Q ^ { s }$$60 - Q ^ { d } = 0.5 Q ^ { d }$$1.5 Q ^ { d } = 60$$Q ^ { d } = 40$Substituting this back into the demand curve, we get:$P = 60 - Q ^ { d }$$P = 60 - 40$$P = 20$Therefore, the equilibrium price is $20 and the equilibrium quantity is 40 million boxes per month.

Suppose That the Market for Cigarettes Is Initially in Equilibrium P=60−QdP = 60 - Q ^ { d }P=60−Qd

Suppose That the Market for Cigarettes Is Initially in Equilibrium $P = 60 - Q ^ { d }$