Question on: SS1 Economics - Determinants of Equilibrium Price, Quantity And Point With Simple Applications

Solution:

To find the equilibrium level of quantity and price, we need to set the demand function equal to the supply function and solve for Q and p:

Qd = Qs

80 - 3p = 12 + 5p

68 = 8p

p = 8.5

Now that we have the value of p, we can substitute it into either the demand or supply function to find the equilibrium quantity:

Qd = 80 - 3p = 80 - 3(8.5) = 55.5

Qs = 12 + 5p = 12 + 5(8.5) = 53.5

The equilibrium level of quantity is approximately 55.5 units and the equilibrium price is approximately $8.50 per unit.