When the price of a good is $5,the quantity demanded of a good is 30 units,and the quantity supplied of the good is 50 units.For every $1 decrease in the price of this good,quantity demanded rises by 5 units and quantity supplied falls by 5 units.The equilibrium price of this good is ___________and the equilibrium quantity of this good is _________ units.
A) $3; 40
B) $4; 35
C) $2; 45
D) $2; 35
E) $3; 35

Question

Quizplus · Accepted Answer

At the initial price of $5, the quantity demanded is 30 units and the quantity supplied is 50 units. For every $1 decrease in price, the quantity demanded increases by 5 units and the quantity supplied decreases by 5 units. To reach equilibrium, where quantity demanded equals quantity supplied, the price needs to decrease to equalize the two. Decreasing the price by $2 (from $5 to $3) increases the quantity demanded to 40 units (30 + 2*5) and decreases the quantity supplied to 40 units (50 - 2*5), achieving equilibrium.

When the Price of a Good Is $5,the Quantity Demanded