Assume that demand for a commodity is represented by the equation Qd=50000-6P and supply by the equation Qs=10P-30000, where Qd and Qs are quantity demanded and quantity supplied, respectively, and P is price. Solve the equations to determine equilibrium quantity. Graph the two equations to substantiate your answers.?

Question

Answer

Solution:

Equating demand and supply equation, we get
50000-6P = 10P-30000
Solving for P, we get
16P = 80000
P = 5000
Substituting P in either of the equation, we get
Qd = 50000-6(5000) = 20000
Qs = 10(5000)-30000 = 20000
Therefore, equilibrium quantity is 20000.

Graphical representation:

The demand and supply equation can be represented graphically as shown below:

![Demand and Supply Graph](

https://www.edurev.in/api/image/5f0819d40e6f4.jpeg)

The intersection point of demand and supply curve represents equilibrium quantity. As shown in the graph, the equilibrium quantity is 20000.

Explanation:

- Equilibrium quantity is the quantity at which demand and supply are equal.
- The demand equation represents the relationship between price and quantity demanded, whereas the supply equation represents the relationship between price and quantity supplied.
- Equating the demand and supply equation gives the price at which quantity demanded and quantity supplied are equal, which is the equilibrium price.
- Substituting the equilibrium price in either of the equations gives the equilibrium quantity.
- Graphically, the intersection point of demand and supply curve represents the equilibrium quantity.

Answer

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