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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» <html><body><p></p>Solution :Equilibrium price and equilibrium quantity are determined at a <a href="https://interviewquestions.tuteehub.com/tag/point-1157106" style="font-weight:bold;" target="_blank" title="Click to know more about POINT">POINT</a> where quantity demanded is equal to quantity supplied <br/> `Qd=200-P"(given)and"Qs=50+<a href="https://interviewquestions.tuteehub.com/tag/2p-300467" style="font-weight:bold;" target="_blank" title="Click to know more about 2P">2P</a>"(given)"` <br/> At equilibrium : Qd = Qs<br/> Hence `200-P=50+2P"or"3P=150""P=50` <br/> `therefore` Equilibrium price = 50 and equilibrium quantity `= 200 - 50 "or"50+(2xx50)` <br/> `=150"unitsor"=150 "units"`. <br/> (<a href="https://interviewquestions.tuteehub.com/tag/ii-1036832" style="font-weight:bold;" target="_blank" title="Click to know more about II">II</a>) If the price of factor of production has changed and <a href="https://interviewquestions.tuteehub.com/tag/new-1114486" style="font-weight:bold;" target="_blank" title="Click to know more about NEW">NEW</a> supply curve is 80 + 2P then at equilibrium : Qd = Qs <br/> `200-P=80+2P"or"3P=120""P=40` <br/> `therefore` Equilibrium price = 40 and equilibrium quantity =`200-40"or"80+2(40)` <br/> =<a href="https://interviewquestions.tuteehub.com/tag/160-277205" style="font-weight:bold;" target="_blank" title="Click to know more about 160">160</a> unitsor=160 units. <br/> Thus as the equilibrium price falls from Rs.50 toRS.40, equilibrium quantity rises from 150 units to 160 units.</body></html>


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