Suppose the demand and supply curves of a Commodity-X is given by the following two equations simultaneously : Qd = 200-P""Qs=50+2P (i) Find the equilibrium price and equilibrium quantity. (ii) Suppose that the price of a factor of production producing the commodity has changed, resulting in the new supply curve given by the equation : Qs'=80+2P. Analyse the new equilibrium quantity as against the original equilibrium price and equilibrium quantity.

Suppose the demand and supply curves of a Commodity-X is given by the

1.	Suppose the demand and supply curves of a Commodity-X is given by the following two equations simultaneously : Qd = 200-P""Qs=50+2P (i) Find the equilibrium price and equilibrium quantity. (ii) Suppose that the price of a factor of production producing the commodity has changed, resulting in the new supply curve given by the equation : Qs'=80+2P. Analyse the new equilibrium quantity as against the original equilibrium price and equilibrium quantity.
Answer» Solution :Equilibrium price and equilibrium quantity are determined at a POINT where quantity demanded is equal to quantity supplied `Qd=200-P"(given)and"Qs=50+2P"(given)"` At equilibrium : Qd = Qs Hence `200-P=50+2P"or"3P=150""P=50` `therefore` Equilibrium price = 50 and equilibrium quantity `= 200 - 50 "or"50+(2xx50)` `=150"unitsor"=150 "units"`. (II) If the price of factor of production has changed and NEW supply curve is 80 + 2P then at equilibrium : Qd = Qs `200-P=80+2P"or"3P=120""P=40` `therefore` Equilibrium price = 40 and equilibrium quantity =`200-40"or"80+2(40)` =160 unitsor=160 units. Thus as the equilibrium price falls from Rs.50 toRS.40, equilibrium quantity rises from 150 units to 160 units.